EXHIBIT 99.1
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
EXECUTIVE STOCK OPTION AGREEMENT
(NON-STATUTORY)
This Executive Stock Option Agreement is made and entered as of the
11th day of November, 1996. This option is being issued outside of the
Company's 1996 Stock Option Plan (the "PLAN"), however, any terms not defined
in this Agreement will have the meanings ascribed to such terms in the Plan.
The Board of Directors of the Company has selected Xxxxxx X. XxXxxxx (the
"OPTIONEE") to receive the following grant of a nonstatutory stock option
("STOCK OPTION") to purchase shares of the common stock of DAOU SYSTEMS,
INC., a California corporation (the "CORPORATION"), on the terms and
conditions set forth below to which Optionee accepts and agrees:
1. Stock Options Granted:
Number of Shares Subject to Option 100,000 shares
Date of Grant November 11, 1996
Vesting Commencement Date November 11, 1996
Exercise Price Per Share $6.00
Expiration Date November 11, 2006
2. The Stock Option is granted to purchase the number of shares of
authorized but unissued common stock of the Corporation specified in SECTION
1 (the "SHARES"). The Stock Option will expire, and all rights to exercise
it will terminate on the earliest of: (a) the date provided below in SECTIONS
5 AND 6, and (b) the Expiration Date. The number of shares subject to the
Stock Option granted pursuant to this Agreement will be adjusted as provided
in the Plan. This Stock Option is intended by the Corporation and the
Optionee to be a Nonstatutory Stock Option and does not qualify for any
special tax benefits to the Optionee.
3. Except as otherwise set forth herein, the Stock Option will be
exercisable in all respects in accordance with the terms of the Plan as they
relate to Non-Statutory Stock Options which are incorporated herein by this
reference. Optionee acknowledges having received and read a copy of the Plan.
4. Optionee will have the right to exercise the Stock Option in
accordance with the following schedule:
(a) The Stock Option may not be exercised in whole or in part at any
time prior to the end of the first full year following the Vesting
Commencement Date.
(b) Optionee may exercise the Stock Option as to twenty percent (20%)
of the Shares at the end of the first full year following the Vesting
Commencement Date.
(c) Optionee may exercise the Stock Option as to an additional
twenty percent (20%) of the Shares at the end of each full year thereafter
following the Vesting Commencement Date.
(d) If at any time after the end of the first full year following
the Vesting Commencement Date a change in control (as defined in the
following sentence) occurs, then Optionee may exercise the Stock Option as to
seventy percent (70%) of the Shares which are not otherwise vested on the
date of the change in control. For purposes of this SECTION 4, "change in
control" means any person becoming the beneficial owner (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of more than fifty
percent (50%) of the Common Stock of the Corporation outstanding at such
time, without the prior approval of the Board, but does not include any
changes in ownership upon any firm commitment underwritten offering of its
securities to the general public.
(e) The right to exercise the Stock Option will be cumulative.
Optionee may buy all, or from time to time any part, of the maximum number of
shares which are exercisable under the Stock Option, but in no case may
Optionee exercise the Stock Option with regard to a fraction of a share, or
for any share for which the Stock Option is not exercisable.
5. The Stock Option will lapse and becomes unexercisable in full on the
earliest of the following events:
(a) the first anniversary of the Optionee's death, as provided below
in SECTION 6;
(b) the first anniversary of the date the Optionee ceases to be an
Employee due to total and permanent disability, as provided below in SECTION
6;
(c) the date otherwise provided below in SECTION 6, unless the
Committee otherwise extends such period before the applicable expiration date;
(d) the date provided in Section 9 of the Plan for a transaction
described in such Section; or
(e) the date the Optionee files or has filed against him or her a
petition in bankruptcy.
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6. If Optionee ceases to be an Employee for any reason other than his or
her death or disability, the Optionee will have the right, subject to the
other provisions of this Agreement, to exercise the Stock Option for thirty
(30) days after his or her termination of employment, but not beyond the
otherwise applicable term of the Option and only to the extent that on such
date of termination of employment the Optionee's right to exercise such
Option had vested, and at the end of such thirty (30)-day period the Stock
Option will expire, and all rights to exercise it will terminate.
(a) For purposes of this SECTION 6, the employment relationship will
be treated as continuing intact while the Optionee is an active employee of
the Corporation or any Affiliate, or is on military leave, sick leave, or
other bona fide leave of absence to be determined in the sole discretion of
the Committee.
(b) If Optionee dies while an Employee, or after ceasing to be an
Employee but during the period while he or she could have exercised an Option
under the preceding sub-Sections (a) or (b), the Option granted to the
Optionee may be exercised, to the extent it has vested at the time of death
and subject to the Plan, at any time within twelve (12) months after the
Optionee's death, by the executors or administrators of his or her estate or
by any person or persons who acquire the Option by will or the laws of
descent and distribution, but not beyond the otherwise applicable term of the
Option.
(c) If Optionee ceases to be an Employee due to becoming totally and
permanently disabled within the meaning of Section 22(e)(3) of the Code, the
Stock Option may be exercised to the extent it has vested at the time of
cessation and, subject to the Plan, at any time within twelve (12) months
after the Optionee's termination of employment, but not beyond the otherwise
applicable term of the Stock Option.
7. The Optionee agrees to comply with all laws, rules, and regulations
applicable to the grant and exercise of the Stock Option and the sale or
other disposition of the common stock of the Corporation received pursuant to
the exercise of such Stock Option.
8. The Stock Option will not become exercisable unless and until the
shares exercisable under the Stock Option have been qualified under the
California Corporate Securities Law of 1968 pursuant to a permit application
filed with the California Department of Corporations or unless the exercise
is otherwise exempt from the qualification requirements of such law. The
Stock Option is conditioned upon the Optionee's representation, which
Optionee hereby confirms as of the date of this Agreement and which Optionee
must confirm as of the date of any exercise of all or any part of the Stock
Option, that:
(a) Optionee understands that both this Stock Option and any shares
purchased upon its exercise are securities, the issuance of which require
compliance with state and Federal securities laws;
(b) Optionee understands that neither the Options nor the Shares
have been registered under the Securities Act of 1933 (the "ACT") in reliance
upon a specific exemption
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contained in the Act which depends upon Optionee's bona fide investment
intention in acquiring these securities; that Optionee's intention is to hold
these securities for Optionee's own benefit for an indefinite period; that
Optionee has no present intention of selling or transferring any part thereof
(recognizing that the Stock Option is not transferable) and that certain
restrictions may exist on transfer of the shares issued upon exercise of the
Stock Option;
(c) Optionee understands that the Shares issued upon exercise of
this Stock Option, in addition to other restrictions on transfer, must be
held indefinitely unless subsequently registered under the Act, or unless an
exemption from registration is available; that Rule 701 and Rule 144, two
exemptions from registration which may be available, are only available after
the satisfaction of certain conditions and require the presence of a U.S.
public market for such Shares; that no certainty exists that a U.S. public
market for the shares will exist, and that otherwise Optionee may have to
sell the Shares pursuant to another exemption from registration which
exemption may be difficult to satisfy; and
(d) The Corporation will not be under any obligation to issue any
Shares upon the exercise of this Stock Option unless and until the
Corporation has determined that:
(i) it and Optionee have taken all actions required to register
such Shares under the Securities Act, or to perfect an exemption from the
registration requirements thereof;
(ii) any applicable listing requirement of any stock exchange
on which such Shares are listed has been satisfied; and
(iii) all other applicable provisions of state and federal law
have been satisfied.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Stock
Option Agreement, in the case of the Corporation by its duly authorized
officer, as of the date and year written above.
OPTIONEE DAOU SYSTEMS, INC.,
a California corporation
/s/ Xxxxxx X. XxXxxxx By: /s/ Xxxxxx X. Xxxx
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(signature) (signature)
XXXXXX X. XXXX
XXXXXX X. XXXXXXX Its: PRESIDENT
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(Type or Print Name)
Address: -------------------------
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[SIGNATURE PAGE TO DAOU SYSTEMS, INC.
EXECUTIVE STOCK OPTION AGREEMENT]
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