Exhibit (d)(2)
PREDICTIVE SYSTEMS, INC.
STOCK OPTION AGREEMENT
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RECITALS
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A. The Board has adopted the Plan for the purpose of retaining
the services of selected Employees, non-employee members of the Board or of the
board of directors of any Parent or Subsidiary and consultants and other
independent advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or
a Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to
Optionee, as of the Grant Date, an option to purchase up to the number of Option
Shares specified in the Grant Notice. The option shares shall be purchasable
from time to time during the option term specified in Paragraph 2 at the
Exercise Price.
2. Option Term. This option shall have a maximum term of
ten (10) years measured from the Grant Date and shall accordingly expire at the
close of business on the Expiration Date, unless sooner terminated in accordance
with Paragraph 5 or 6.
3. Limited Transferability. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, if this option is designated a
Non-Statutory Option in the Grant Notice, then this option may be assigned in
whole or in part during Optionee's lifetime either as (i) a gift to one or more
family members of Optionee's Immediate Family, to a trust in which Optionee
and/or one or more such family members hold more than fifty percent (50%) of the
beneficial interest or an entity in which more than fifty percent (50%) of the
voting interests are owned by Optionee and/or one or more such family members,
or (ii) pursuant to a domestic relations order. The assigned portion shall be
exercisable only by the person or persons who acquire a proprietary interest in
the option pursuant to such assignment. The terms applicable to the assigned
portion shall be the same as those in effect for this option immediately prior
to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.
4. Dates of Exercise. This option shall become
exercisable for the Option Shares in one or more installments as specified in
the Grant Notice. As the option becomes exercisable for such installments, those
installments shall accumulate, and the option shall remain exercisable for the
accumulated installments until the Expiration Date or sooner termination of the
option term under Paragraph 5 or 6.
5. Cessation of Service. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be outstanding)
prior to the Expiration Date should any of the following provisions become
applicable:
(i) Should Optionee cease to remain in Service
for any reason (other than death, Permanent Disability or Misconduct)
while this option is outstanding, then this option shall remain
exercisable until the earlier of (i) the expiration of the three
(3)-month period measured from the date of such cessation of Service or
(ii) the Expiration Date.
(ii) Should Optionee die while holding this
option, then Optionee's Beneficiary shall have the right to exercise
this option until the earlier of (A) the expiration of the twelve
(12)-month period measured from the date of Optionee's death or (B) the
Expiration Date.
(iii) Should Optionee cease Service by reason of
Permanent Disability while this option is outstanding, then this option
shall remain exercisable until the earlier of (i) the expiration of the
twelve (12)-month period measured from the date of such cessation of
Service or (ii) the Expiration Date.
(iv) During the applicable post-Service exercise
period, this option may not be exercised in the aggregate for more than
the number of vested Option Shares for which the option is exercisable
on the date of Optionee's cessation of Service. Upon the expiration of
the applicable exercise period or (if earlier) upon the Expiration
Date, this option shall terminate and cease to be outstanding for any
vested Option Shares for which the option has not been exercised.
However, this option shall, immediately upon Optionee's cessation of
Service for any reason, terminate and cease to be outstanding to the
extent this option is not otherwise at that time exercisable for vested
shares.
(v) Should Optionee's Service be terminated for
Misconduct or should Optionee engage in Misconduct while this option is
outstanding, then this option shall terminate immediately and cease to
be outstanding.
6. Special Acceleration of Option.
(a) In the event of a Change in Control, this
option, to the extent outstanding at that time but not otherwise fully
exercisable, shall automatically accelerate so that this option shall,
immediately prior to the effective date of the Change in Control, become
exercisable for all of the Option Shares at the time subject to this option and
may be exercised for any or all of those Option Shares as fully-vested shares of
Common Stock. No such acceleration of this option, however, shall occur if and
to the extent: (i) this option is, in connection with the Change in Control,
assumed or otherwise continued in full force and effect by the successor
corporation (or parent thereof) pursuant to the terms of the Change in Control
or (ii) this option is replaced with a cash incentive program of the successor
corporation which preserves the spread existing at the time of the Change in
Control on the Option Shares for which this option is not otherwise at that time
exercisable (the excess of the Fair Market Value of those Option Shares over the
aggregate Exercise Price payable for such shares) and provides for subsequent
pay-out in accordance with the same option exercise schedule set forth in the
Grant Notice.
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(b) Immediately following the consummation of
the Change in Control, this option shall terminate and cease to be outstanding,
except to the extent assumed by the successor corporation (or parent thereof) or
otherwise expressly continued in full force and effect pursuant to the terms of
the Change in Control.
(c) If this option is assumed in connection with
a Change in Control, then this option shall be appropriately adjusted,
immediately after such Change in Control, to apply to the number and class of
securities which would have been issuable to Optionee in consummation of such
Change in Control had the option been exercised immediately prior to such Change
in Control, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
(d) This Agreement shall not in any way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
7. Adjustment in Option Shares. Should any change be
made to the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration, appropriate adjustments shall be made to (i) the total
number and/or class of securities subject to this option and (ii) the Exercise
Price in order to reflect such change and thereby preclude a dilution or
enlargement of benefits hereunder.
8. Stockholder Rights. The holder of this option shall
not have any stockholder rights with respect to the Option Shares until such
person shall have exercised the option, paid the Exercise Price and become a
holder of record of the purchased shares.
9. Manner of Exercising Option. In order to exercise
this option with respect to all or any part of the Option Shares for which this
option is at the time exercisable, Optionee (or any other person or persons
exercising the option) must take the following actions:
(i) Execute and deliver to the
Corporation a Notice of Exercise for the Option Shares for which the
option is exercised.
(ii) Pay the aggregate Exercise Price
for the purchased shares in one or more of the following forms:
(A) cash or check made payable
to the Corporation;
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(B) a promissory note payable
to the Corporation, but only to the extent authorized by the
Plan Administrator in accordance with Paragraph 13;
(C) shares of Common Stock
held by Optionee (or any other person or persons exercising
the option) for the requisite period necessary to avoid a
charge to the Corporation's earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise Date;
or
(D) through a special sale and
remittance procedure pursuant to which Optionee (or any other
person or persons exercising the option) shall concurrently
provide irrevocable instructions (I) to a Corporation-approved
brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover
the aggregate Exercise Price payable for the purchased shares
plus all applicable income and employment taxes required to be
withheld by the Corporation by reason of such exercise and
(II) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to
complete the sale.
Except to the extent the sale and remittance
procedure is utilized in connection with the option exercise,
payment of the Exercise Price must accompany the Notice of
Exercise delivered to the Corporation in connection with the
option exercise.
(iii) Furnish to the Corporation
appropriate documentation that the person or persons exercising the
option (if other than Optionee) have the right to exercise this option.
(iv) Make appropriate arrangements with
the Corporation (or Parent or Subsidiary employing or retaining
Optionee) for the satisfaction of all income and employment tax
withholding requirements applicable to the option exercise.
(b) As soon as practical after the Exercise
Date, the Corporation shall issue to or on behalf of Optionee (or any other
person or persons exercising this option) a certificate for the purchased Option
Shares, with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for
any fractional shares.
10. Compliance with Laws and Regulations.
(a) The exercise of this option and the issuance
of the Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the Nasdaq
National Market, if applicable) on which the Common Stock may be listed for
trading at the time of such exercise and issuance.
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(b) The inability of the Corporation to obtain
approval from any regulatory body having authority deemed by the Corporation to
be necessary to the lawful issuance and sale of any Common Stock pursuant to
this option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained. The Corporation, however, shall use its best efforts to
obtain all such approvals.
11. Successors and Assigns. Except to the extent
otherwise provided in Paragraphs 3 and 6, the provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and Optionee and Optionee's assigns and Beneficiaries.
12. Notices. Any notice required to be given or delivered
to the Corporation under the terms of this Agreement shall be in writing and
addressed to the Corporation at its principal corporate offices. Any notice
required to be given or delivered to Optionee shall be in writing and addressed
to Optionee at the address indicated below Optionee's signature line on the
Grant Notice. All notices shall be deemed effective upon personal delivery or
upon deposit in the U.S. mail, postage prepaid and properly addressed to the
party to be notified.
13. Financing. The Plan Administrator may, in its
absolute discretion and without any obligation to do so, permit Optionee to pay
the Exercise Price for the purchased Option Shares by delivering a full-recourse
promissory note payable to the Corporation. The terms of any such promissory
note (including the interest rate, the requirements for collateral and the terms
of repayment) shall be established by the Plan Administrator in its sole
discretion.
14. Construction. This Agreement and the option evidenced
hereby are made and granted pursuant to the Plan and are in all respects limited
by and subject to the terms of the Plan. All decisions of the Plan Administrator
with respect to any question or issue arising under the Plan or this Agreement
shall be conclusive and binding on all persons having an interest in this
option.
15. Governing Law. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of New
York without resort to that State's conflict-of-laws rules.
16. Excess Shares. If the Option Shares covered by this
Agreement exceed, as of the Grant Date, the number of shares of Common Stock
which may without stockholder approval be issued under the Plan, then this
option shall be void with respect to those excess shares, unless stockholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock issuable under the Plan is obtained in accordance with the provisions of
the Plan.
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17. Additional Terms Applicable to an Incentive Option.
In the event this option is designated an Incentive Option in the Grant Notice,
the following terms and conditions shall also apply to the grant:
(i) This option shall cease to qualify
for favorable tax treatment as an Incentive Option if (and to the
extent) this option is exercised for one or more Option Shares: (A)
more than three (3) months after the date Optionee ceases to be an
Employee for any reason other than death or Permanent Disability or (B)
more than twelve (12) months after the date Optionee ceases to be an
Employee by reason of Permanent Disability.
(ii) No installment under this option
shall qualify for favorable tax treatment as an Incentive Option if
(and to the extent) the aggregate Fair Market Value (determined at the
Grant Date) of the Common Stock for which such installment first
becomes exercisable hereunder would, when added to the aggregate value
(determined as of the respective date or dates of grant) of the Common
Stock or other securities for which this option or any other Incentive
Options granted to Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any Parent or
Subsidiary) first become exercisable during the same calendar year,
exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should
such One Hundred Thousand Dollar ($100,000) limitation be exceeded in
any calendar year, this option shall nevertheless become exercisable
for the excess shares in such calendar year as a Non-Statutory Option.
(iii) Should the exercisability of this
option be accelerated upon a Change in Control, then this option shall
qualify for favorable tax treatment as an Incentive Option only to the
extent the aggregate Fair Market Value (determined at the Grant Date)
of the Common Stock for which this option first becomes exercisable in
the calendar year in which the Change in Control occurs does not, when
added to the aggregate value (determined as of the respective date or
dates of grant) of the Common Stock or other securities for which this
option or one or more other Incentive Options granted to Optionee prior
to the Grant Date (whether under the Plan or any other option plan of
the Corporation or any Parent or Subsidiary) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars
($100,000) in the aggregate. Should the applicable One Hundred Thousand
Dollar ($100,000) limitation be exceeded in the calendar year of such
Change in Control, the option may nevertheless be exercised for the
excess shares in such calendar year as a Non-Statutory Option.
(iv) Should Optionee hold, in addition
to this option, one or more other options to purchase Common Stock
which become exercisable for the first time in the same calendar year
as this option, then the foregoing limitations on the exercisability of
such options as Incentive Options shall be applied on the basis of the
order in which such options are granted.
18. Leave of Absence. The following provisions shall
apply upon the Optionee's commencement of an authorized leave of absence:
(i) The exercise schedule in effect
under the Grant Notice shall be frozen as of the first day of the
authorized leave, and this option shall not become exercisable for any
additional installments of the Option Shares during the period Optionee
remains on such leave.
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(ii) Should Optionee resume active
Employee status within sixty (60) days after the start date of the
authorized leave, Optionee shall, for purposes of the exercise schedule
set forth in the Grant Notice, receive Service credit for the entire
period of such leave. If Optionee does not resume active Employee
status within such sixty (60)-day period, then no Service credit shall
be given for the period of such leave.
(iii) If this option is designated as an
Incentive Option in the Grant Notice, then the following additional
provision shall apply:
(A) If the leave of absence
continues for more than ninety (90) days, then this option
shall automatically convert to a Non-Statutory Option at the
end of the three (3)-month period measured from the
ninety-first (91st) day of such leave, unless Optionee's
reemployment rights are guaranteed by statute or by written
agreement. Following any such conversion of this option, all
subsequent exercises of this option, whether effected before
or after Optionee's return to active Employee status, shall
result in an immediate taxable event, and the Corporation
shall be required to collect from Optionee the income and
employment withholding taxes applicable to such exercise.
(iv) In no event shall this option
become exercisable for any additional Option Shares or otherwise remain
outstanding if Optionee does not resume Employee status prior to the
Expiration Date of the option term.
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EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Predictive Systems, Inc. (the "Corporation")
that I elect to purchase _________ shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $________ per share (the
"Exercise Price") pursuant to that certain option (the "Option") granted to me
under the Corporation's 1999 Stock Incentive Plan on _______________.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.
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Date
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Optionee
Address:
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Print name in exact manner it is to appear
on the stock certificate:
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Address to which certificate is to be sent,
if different from address above:
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Social Security Number:
Employee Number
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APPENDIX
The following definitions shall be in effect under the
Agreement:
A. Agreement shall mean this Stock Option Agreement.
B. Beneficiary shall mean, in the event the Plan
Administrator implements a beneficiary designation procedure, the person
designated by Optionee, pursuant to such procedure, to succeed to Optionee's
rights under the option evidenced by this Agreement to the extent the option is
held by Optionee at the time of death. In the absence of such designation or
procedure, the Beneficiary shall be the personal representative of the estate of
Optionee or the person or persons to whom the option is transferred by will or
the laws of descent and distribution.
C. Board shall mean the Corporation's Board of
Directors.
D. Change in Control shall mean a change in ownership or
control of the Corporation effected through any of the following transactions:
(a) a merger, consolidation or reorganization
approved by the Corporation's stockholders, unless securities representing more
than fifty percent (50%) of the total combined voting power of the voting
securities of the successor corporation are immediately thereafter beneficially
owned, directly or indirectly and in substantially the same proportion, by the
persons who beneficially owned the Corporation's outstanding voting securities
immediately prior to such transaction.
(b) any stockholder-approved transfer or other
disposition of all or substantially all of the Corporation's assets, or
(c) the acquisition, directly or indirectly by
any person or related group of persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made directly to the
Corporation's stockholders which the Board recommends such stockholders to
accept.
E. Code shall mean the Internal Revenue Code of 1986, as
amended.
F. Common Stock shall mean the Corporation's common
stock.
G. Corporation shall mean Predictive Systems, Inc., a
Delaware corporation.
H. Employee shall mean an individual who is in the
employ of the Corporation (or any Parent or Subsidiary), subject to the control
and direction of the employer entity as to both the work to be performed and the
manner and method of performance.
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I. Exercise Date shall mean the date on which the option
shall have been exercised in accordance with Paragraph 9 of the Agreement.
J. Exercise Price shall mean the exercise price per
share as specified in the Grant Notice.
K. Expiration Date shall mean the date on which the
option expires as specified in the Grant Notice.
L. Fair Market Value per share of Common Stock on any
relevant date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time
traded on the Nasdaq National Market, then the Fair Market Value shall
be the closing selling price per share of Common Stock on the date in
question, as the price is reported by the National Association of
Securities Dealers on the Nasdaq National Market or any successor
system. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
(ii) If the Common Stock is at the time
listed on any Stock Exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question
on the Stock Exchange determined by the Plan Administrator to be the
primary market for the Common Stock, as such price is officially quoted
in the composite tape of transactions on such exchange. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
M. Grant Date shall mean the date of grant of the option
as specified in the Grant Notice.
N. Grant Notice shall mean the Notice of Grant of Stock
Option accompanying the Agreement, pursuant to which Optionee has been informed
of the basic terms of the option evidenced hereby.
O. Immediate Family of Optionee shall mean Optionee's
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former
spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law, including adoptive
relationships.
P. Incentive Option shall mean an option which satisfies
the requirements of Code Section 422.
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Q. Misconduct shall mean the commission of any act of
fraud, embezzlement or dishonesty by Optionee, any unauthorized use or
disclosure by Optionee of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any intentional wrongdoing by
Optionee, whether by omission or commission, which adversely affects the
business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not limit the grounds for the
dismissal or discharge of Optionee or any other individual in the Service of the
Corporation (or any Parent or Subsidiary).
R. Non-Statutory Option shall mean an option not
intended to satisfy the requirements of Code Section 422.
S. Notice of Exercise shall mean the notice of exercise
in the form attached hereto as Exhibit I.
T. Option Shares shall mean the number of shares of
Common Stock subject to the option as specified in the Grant Notice.
U. Optionee shall mean the person to whom the option is
granted as specified in the Grant Notice.
V. Parent shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the Corporation,
provided each corporation in the unbroken chain (other than the Corporation)
owns, at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
W. Permanent Disability shall mean the inability of
Optionee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which is expected to result
in death or has lasted or can be expected to last for a continuous period of
twelve (12) months or more.
X. Plan shall mean the Corporation's 1999 Stock
Incentive Plan.
Y. Plan Administrator shall mean either the Board or a
committee of the Board acting in its administrative capacity under the Plan.
Z. Service shall mean Optionee's performance of services
for the Corporation (or any Parent or Subsidiary) in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor.
AA. Stock Exchange shall mean the American Stock Exchange
or the New York Stock Exchange.
BB. Subsidiary shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
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