EXHIBIT 4.2
STOCK OPTION AGREEMENT
[Employee Incentive/Non-Incentive Stock Option Agreement Under Plan]
AGREEMENT, made as of _________ __, _____ by and between WORLDS INC., a
New Jersey corporation (the "Company"), and ____________________ (the
"Employee").
WHEREAS, on _________ __, ______ ("Grant Date"), pursuant to the terms
and conditions of the Company's 1997 Incentive and Non-Qualified Stock Option
Plan (the "Plan"), the Board of Directors of the Company or the Committee (as
such term is defined in the Plan) authorized the grant to the Employee of an
option to purchase an aggregate of ___ shares of the authorized but unissued
common stock of the Company, $.001 par value ("Common Stock"), conditioned upon
the Employee's acceptance thereof upon the terms and conditions set forth in
this Agreement and subject to the terms of the Plan (capitalized terms used
herein and not otherwise defined shall have the meanings set forth in the Plan);
and
WHEREAS, the Employee desires to acquire the option on the terms and
conditions set forth in this Agreement.
IT IS AGREED:
1. Grant of Stock Option. The Company hereby grants to the Employee the
right and option ("Option") to purchase all or any part of an aggregate of ___
shares of Common Stock ("Option Shares") on the terms and conditions set forth
herein and subject to the provisions of the Plan.
2. [Non-]Incentive Stock Option. The Option represented hereby is [not]
intended to be an Option which qualifies as an "Incentive Stock Option" under
Section 422 of the Internal Revenue Code of 1986, as amended ("Code").
3. Exercise Price. The exercise price ("Exercise Price") of the Option
shall be $____ per share, [cannot be less than 100% of Fair Market Value, 110%
of Fair Market Value for incentive options to greater than 10% shareholder]
subject to adjustment as provided in the Plan.
4. Exercisability. This Option shall become exercisable on _____ __,
_____, subject to the terms and conditions of the Plan and this Agreement, and
shall remain exercisable until _________ __, ____ [cannot exceed 10 years; 5
years for incentive options to greater than 10% shareholders] (the "Exercise
Period").
OR
4. Exercisability. This Option shall become exercisable, subject to the
terms and conditions of the Plan and this Agreement, as follows: (i) the right
to purchase 331/3% of the Option Shares shall be exercisable on and after
_______ __, ____ [First Anniversary of Date of Grant], (ii) the right to
purchase an additional 331/3% of the Option Shares shall be exercisable on and
after _______ __, ____ [Second Anniversary of Date of Grant], and (iii) the
right to purchase the remaining 331/3% of the Option Shares shall be exercisable
on and after _______ __, ____ [Third Anniversary of Date of Grant]. After a
portion of the Option becomes exercisable, it shall remain exercisable except as
otherwise provided herein, until the close of business on __________ __, ____
[up to Tenth Anniversary from Date of Grant; or five years for incentive options
to 10% holders] (the "Exercise Period").
5. Effect of Termination of Employment.
5.1 Termination Due to Death. If Employee's employment by the
Company terminates by reason of death, the portion of the Option, if any, that
was exercisable as of the date of death may thereafter be exercised by the legal
representative of the estate or by the legatee of the Employee under the will of
the Employee, for a period of one year from the date of such death or until the
expiration of the Exercise Period, whichever period is shorter. The portion of
the Option, if any, that was not exercisable as of the date of death shall
immediately expire.
5.2 Termination Due to Disability. If Employee's employment by
the Company terminates by reason of disability, the portion of the Option, if
any, that was exercisable as of the date of disability may thereafter be
exercised by the Employee for a period of one year from the date of such
termination or until the expiration of the Exercise Period, whichever period is
shorter. The portion of the Option, if any, that was not exercisable as of the
date of termination shall immediately expire.
5.3 Termination by the Company Without Cause and/or Due to
Retirement. If Employee's employment is terminated by the Company without cause
or due to the normal retirement of Employee after his 65th birthday, then the
portion of the Option which has vested by the date of termination of employment
may be exercised for a period of three months from termination of employment or
until the expiration of the Exercise Period, whichever is shorter. The portion
of the Option, if any, not yet exercisable on the date of termination of
employment shall immediately expire.
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5.4 Other Termination.
5.4.1 If Employee's employment is terminated for
any reason other than (i) death, (ii) disability, (iii) normal retirement, or
(iv) without cause by the Company, the Option shall expire on the date of
termination of employment.
5.4.2 The Committee, in the event the Employee's
employment is terminated for cause, may require the Employee to return to the
Company the economic benefit of any Option Shares purchased hereunder by the
Employee within the six month period prior to the date of termination. In such
event, the Employee hereby agrees to remit to the Company, in cash, an amount
equal to the difference between the Fair Market Value (on the date of
termination) of the Option Shares so purchased by Employee (or the sales price
of such Option Shares if the Option Shares were sold during such six month
period) and the Exercise Price.
5.5 Competing With the Company. In the event that, within six
(6) months after the date of termination of Employee's employment with the
Company, Employee accepts employment with, or becomes engaged as a consultant
by, any competitor of, or otherwise competes with, the Company, the Committee,
in its sole discretion, may require such Employee to return to the Company the
economic value of any Option Shares purchased hereunder by the Employee within
the six-month period prior to the date of termination. In such event, Employee
agrees to remit the economic value to the Company in accordance with Section
5.4.2.
6. Withholding Tax. Not later than the date as of which an amount first
must be included in the gross income of the Employee for Federal income tax
purposes with respect to the Option, the Employee shall pay to the Company (or
other entity identified by the Committee), or make arrangements satisfactory to
the Company (or other entity identified by the Committee) regarding the payment
of, any Federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount ("Withholding Tax"). Unless otherwise
determined by the Committee, withholding obligations may be settled with Common
Stock, including Common Stock underlying the subject option, provided that any
applicable requirements under Section 16 of the Exchange Act are satisfied so as
to avoid liability thereunder. The obligations of the Company under the Plan and
pursuant to this Agreement shall be conditioned upon such payment or
arrangements with the Company and the Company shall, to the extent permitted by
law, have the right to deduct any Withholding Taxes from any payment of any kind
otherwise due to the Employee from the Company.
7. Method of Exercise.
7.1 Notice to the Company. The Option may be exercised in
whole or in part by written notice in the form attached hereto as Exhibit A
directed to the Company at its principal place of business accompanied by full
payment as hereinafter provided of the exercise price for the number of Option
Shares specified in the notice and of the Withholding Taxes, if any.
7.2 Delivery of Option Shares. The Company shall deliver a
certificate for the Option Shares to the Employee as soon as practicable after
payment therefor.
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7.3 Payment of Purchase Price.
7.3.1 Cash Payment. The Employee shall make cash
payments by wire transfer, certified or bank check or personal check, in each
case payable to the order of the Company. The Company shall not be required to
deliver certificates for Option Shares until the Company has confirmed the
receipt of good and available funds in payment of the purchase price thereof.
7.3.2 Promissory Note. The Committee, in its sole
discretion, may allow Employee to issue a personal interest bearing full
recourse promissory note with such terms and provisions as the Committee may
authorize.
7.3.3 Stock Payment. The Committee, in its sole
discretion, may allow Employee to use Common Stock of the Company owned by him
to make any required payments by delivery of stock certificates in negotiable
form which are effective to transfer good and valid title thereto to the
Company, free of any liens or encumbrances. Shares of Common Stock used for this
purpose shall be valued at the Fair Market Value.
7.3.4 Payment of Withholding Tax. Any required
Withholding Tax may be paid in cash or with Common Stock in accordance with
Sections 7.3.1 and 7.3.2, respectively, and Section 6.
7.3.5 Exchange Act Compliance. Notwithstanding
the foregoing, the Company shall have the right to reject payment in the form of
Common Stock if in the opinion of counsel for the Company, (i) it could result
in an event of "recapture" under Section 16(b) of the Securities Exchange Act of
1934; (ii) such shares of Common Stock may not be sold or transferred to the
Company; or (iii) such transfer could create legal difficulties for the Company.
8. Nonassignability. The Option shall not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner, except by will or by the
laws of descent and distribution in the event of the death of the Employee. No
transfer of the Option by the Employee by will or by the laws of descent and
distribution shall be effective to bind the Company unless the Company shall
have been furnished with written notice thereof and a copy of the will and/or
such other evidence as the Company may deem necessary to establish the validity
of the transfer and the acceptance by the transferee or transferees of the terms
and conditions of the Option.
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9. Company Representations. The Company hereby represents and warrants
to the Employee that:
(i) the Company, by appropriate and all required
action, is duly authorized to enter into this Agreement and consummate
all of the transactions contemplated hereunder; and
(ii) the Option Shares, when issued and delivered by
the Company to the Employee in accordance with the terms and conditions
hereof, will be duly and validly issued and fully paid and
non-assessable.
10. Employee Representations. The Employee hereby represents and
warrants to the Company that:
(i) he or she is acquiring the Option and shall
acquire the Option Shares for his own account and not with a view
towards the distribution thereof;
(ii) he or she has received a copy of the Plan as
in effect as of the date of this Agreement;
(iii) he or she has received a copy of all reports
and documents required to be filed by the Company with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended, within the last 24 months and all reports issued by
the Company to its stockholders;
(iv) he or she understands that he or she is subject
to the Company's Xxxxxxx Xxxxxxx Policy and has received a copy of such
policy as of the date of this Agreement;
(v) he or she understands that he or she must bear
the economic risk of the investment in the Option Shares, which cannot
be sold by him unless they are registered under the Securities Act of
1933 (the "1933 Act") or an exemption therefrom is available thereunder
and that the Company is under no obligation to register the Option
Shares for sale under the 1933 Act;
(vi) in his or her position with the Company, he or
she has had both the opportunity to ask questions and receive answers
from the officers and directors of the Company and all persons acting
on its behalf concerning the terms and conditions of the offer made
hereunder and to obtain any additional information to the extent the
Company possesses or may possess such information or can acquire it
without unreasonable effort or expense necessary to verify the accuracy
of the information obtained pursuant to clause (iii) above;
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(vii) he or she is aware that the Company shall place
stop transfer orders with its transfer agent against the transfer of
the Option Shares in the absence of registration under the 1933 Act or
an exemption therefrom as provided herein; and
(viii) if, at the time of issuance of the Option
Shares, the issuance of such shares have not been registered under the
1933 Act, the certificates evidencing the Option Shares shall bear the
following legend:
"The shares represented by this certificate have been
acquired for investment and have not been registered
under the Securities Act of 1933. The shares may not
be sold or transferred in the absence of such
registration or an exemption therefrom under said
Act."
11. Restriction on Transfer of Option Shares.
11.1 Anything in this Agreement to the contrary
notwithstanding, Employee hereby agrees that he shall not sell, transfer by any
means or otherwise dispose of the Option Shares acquired by him without
registration under the 1933 Act, or in the event that they are not so
registered, unless (i) an exemption from the 1933 Act registration requirements
is available thereunder, and (ii) the Employee has furnished the Company with
notice of such proposed transfer and the Company's legal counsel, in its
reasonable opinion, shall deem such proposed transfer to be so exempt.
11.2 Anything in this Agreement to the contrary
notwithstanding, Employee hereby agrees that he shall not sell, transfer by any
means or otherwise dispose of the Option Shares acquired by him
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(i) prior to six months after the Grant Date and (ii) except in accordance with
Company's Xxxxxxx Xxxxxxx Policy regarding the sale and disposition of
securities owned by employees and/or directors of the Company.
12. Adjustments. The number of shares subject to the Option, the
Exercise Price, the Exercise Period and the vesting of the Option shall all be
subject to adjustment under Section 10 of the Plan.
13. Miscellaneous.
13.1 Notices. All notices, requests, deliveries, payments,
demands and other communications which are required or permitted to be given
under this Agreement shall be in writing and shall be either delivered
personally or sent by registered or certified mail, or by private courier to the
parties at their respective addresses set forth herein, or to such other address
as either shall have specified by notice in writing to the other. Notice shall
be deemed duly given hereunder when delivered or mailed as provided herein.
13.2 Conflicts with Plan. In the event of a conflict between
the provisions of the Plan and the provisions of this Agreement, the provisions
of the Plan shall in all respects be controlling.
13.3 Employee and Stockholder Rights. The Employee shall not
have any of the rights of a stockholder with respect to the Option Shares until
such shares have been issued after the due exercise of the Option. Nothing
contained in this Agreement shall be deemed to confer upon Employee any right to
continued employment with the Company or any subsidiary thereof, nor shall it
interfere in any way with the right of the Company to terminate Employee in
accordance with the provisions regarding such termination set forth in
Employee's written employment agreement with the Company, or if there exists no
such agreement, to terminate Employee at will.
13.4 Waiver. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
other or subsequent breach.
13.5 Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supercedes any and all prior agreements with respect to the Option. This
Agreement may not be amended except by writing executed by the Employee and the
Company.
13.6 Binding Effect; Successors. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and, to the
extent not prohibited herein, their respective heirs, successors,
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assigns and representatives. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto and as provided
above, their respective heirs, successors, assigns and representatives any
rights, remedies, obligations or liabilities.
13.7 Governing Law; Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of New Jersey
(without regard to choice of law provisions). Employee (i) agrees that any legal
suit, action or proceeding arising out of or relating to this Agreement shall be
instituted exclusively in New York State Supreme Court, County of New York, or
in the United States District Court for the Southern District of New York, (ii)
waives any objection to the venue of any such suit, action or proceeding and the
right to assert that such forum is not a convenient forum, and (iii) irrevocably
consents to the jurisdiction of the New York State Supreme Court, County of New
York, and the United States District Court for the Southern District of New York
in any such suit, action or proceeding. Employee further agrees to accept and
acknowledge service of any and all process which may be served in any such suit,
action or proceeding in the New York State Supreme Court, County of New York, or
in the United States District Court for the Southern District of New York and
agrees that service of process upon him mailed by certified mail to its address
shall be deemed in every respect effective service of process upon him in any
such suit, action or proceeding.
13.8 Headings. The headings contained herein are for the sole
purpose of convenience of reference, and shall not in any way limit or affect
the meaning or interpretation of any of the terms or provisions of this
Agreement.
13.9 Employee's Options. Employee acknowledges that the Option
and the stock options referred to below are the only stock options granted to
him by the Company.
Date of Grant Number of Shares Exercise Price
------------- ----------------- --------------
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IN WITNESS WHEREOF, the parties hereto have signed this
Agreement as of the day and year first above written:
WORLDS INC. Address: 00 Xxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
By: ______________________________________
Xxxxxx X. Xxxxxx, Chairman of the Board
EMPLOYEE: Address:
------------------------------------
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EXHIBIT A
FORM OF NOTICE OF EXERCISE OF OPTION
----------------------------
DATE
WORLDS INC.
00 Xxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Stock Option Committee of
the Board of Directors
Re: Purchase of Option Shares
Gentlemen:
In accordance with my Stock Option Agreement dated as of
_________ __ ____ with Worlds Inc. (the "Company"), I hereby irrevocably elect
to exercise the right to purchase _________ shares of the Company's common
stock, par value $.001 per share ("Common Stock").
As payment for my shares, enclosed is (check and complete
applicable box[es]):
|_| a [personal check] [certified check] [bank check]
payable to the order of the Company in the sum of
$_________;
|_| confirmation of wire transfer in the amount of
$_____________;
|_| with the consent of the Company, a certificate for
__________ shares of the Company's Common Stock, free
and clear of any encumbrances, duly endorsed, having
a Fair Market Value (as such term is defined in the
1997 Incentive and NonQualified Stock Option Plan) of
$_________; and/or
|_| with the consent of the Company, a personal interest
bearing full recourse promissory note in the amount
of $__________.
I hereby represent and warrant to, and agree with, the Company
that:
(i) I am acquiring the Option and shall acquire the
Option Shares for my own account, for investment, and not with a view
towards the distribution thereof;
(ii) I have received a copy of the Plan and all
reports and documents required to be filed by the Company with the
Commission pursuant to the Exchange Act within the last 24 months and
all reports issued by the Company to its stockholders;
(iii) I understand that I must bear the economic risk
of the investment in the Option Shares, which cannot be sold by me
unless they are registered under the Securities Act of 1933 (the "1933
Act") or an exemption therefrom is available thereunder and that the
Company is under no obligation to register the Option Shares for sale
under the 1933 Act;
(iv) I understand I am subject to the Company's
Xxxxxxx Xxxxxxx Policy and have received a copy of such policy as of
the date of this Agreement;
(v) I agree that I will not sell, transfer by any
means or otherwise dispose of the Option Shares acquired by me hereby
except in accordance with Company's policy, if any, regarding the sale
and disposition of securities owned by employees and/or directors of
the Company;
(vi) in my position with the Company, I have had both
the opportunity to ask questions and receive answers from the officers
and directors of the Company and all persons acting on its behalf
concerning the terms and conditions of the offer made hereunder and to
obtain any additional information to the extent the Company possesses
or may possess such information or can acquire it without unreasonable
effort or expense necessary to verify the accuracy of the information
obtained pursuant to clause (ii) above;
(vii) I am aware that the Company shall place stop
transfer orders with its transfer agent against the transfer of the
Option Shares in the absence of registration under the 1933 Act or an
exemption therefrom as provided herein; and
(viii) if, at the time of issuance of the Option
Shares, the issuance of such shares have not been registered under the
1933 Act, the certificates evidencing the Option Shares shall bear the
following legend:
"The shares represented by this certificate have been acquired
for investment and have not been registered under the
Securities Act of 1933. The shares may not be sold or
transferred in the absence of such registration or an
exemption therefrom under said Act."
Kindly forward to me my certificate at your earliest convenience.
Very truly yours,
------------------------------ ----------------------------------------
(Signature) (Address)
------------------------------ ----------------------------------------
(Print Name)
----------------------------------------
(Social Security Number)
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