Exhibit 10.5
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STRONGHOLD TECHNOLOGIES, INC.
Incentive Stock Option Agreement
Granted Under 2002 California Stock Incentive Plan
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1. Grant of Option.
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This agreement evidences the grant by Stronghold Technologies, Inc., a
Nevada corporation (the "Company"), on , 200[ ] (the "Grant Date") to
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[ ], an employee of the Company who resides in California (the
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"Participant"), of an option to purchase, in whole or in part, on the terms
provided herein and in the Company's 2002 California Stock Incentive Plan (the
"Plan"), a total of [ ] shares (the "Shares") of common stock, $.0001 par
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value per share, of the Company ("Common Stock") at $[ ] per Share.
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Unless earlier terminated, this option shall expire at 5:00 p.m., Eastern time,
on [ ] (the "Final Exercise Date").
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It is intended that the option evidenced by this agreement shall be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant", as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.
2. Vesting Schedule.
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This option will become exercisable ("vest") as to one-third of the
original number of Shares on each anniversary of the Grant Date until the third
anniversary of the Grant Date.
The right of exercise shall be cumulative so that to the extent the option
is not exercised in any period to the maximum extent permissible it shall
continue to be exercisable, in whole or in part, with respect to all Shares for
which it is vested until the earlier of the Final Exercise Date or the
termination of this option under Section 3 hereof or the Plan.
3. Exercise of Option.
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(a) Form of Exercise. Each election to exercise this option shall be in
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writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full. The Participant may
purchase less than the number of shares covered hereby, provided that no partial
exercise of this option may be for any fractional share. Common Stock purchased
upon the exercise of this option shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board of Directors of the Company (the "Board") may,
in its sole discretion, otherwise provide, by (i) delivery of an irrevocable and
unconditional undertaking by a creditworthy broker to deliver promptly to the
Company sufficient funds to pay the exercise price and any required tax
withholding or (ii) delivery by the Participant to the Company of a copy of
irrevocable and unconditional instructions to a creditworthy broker to
deliver promptly to the Company cash or a check sufficient to pay the exercise
price and any required tax withholding;
(3) when the Common Stock is registered under the Securities Exchange
Act of 1934 (the "Exchange Act"), by delivery of shares of Common Stock owned by
the Participant valued at their fair market value as determined by (or in a
manner approved by) the Board in good faith ("Fair Market Value"), provided (i)
such method of payment is then permitted under applicable law and (ii) such
Common Stock, if acquired directly from the Company was owned by the Participant
at least six months prior to such delivery;
(4) to the extent permitted by the Board, in its sole discretion by
(i) delivery of a promissory note of the Participant to the Company on terms
determined by the Board, or (ii) payment of such other lawful consideration as
the Board may determine; or
(5) by any combination of the above permitted forms of payment.
(b) Continuous Relationship with the Company Required. Except as otherwise
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provided in this Section 3, this option may not be exercised unless the
Participant, at the time he or she exercises this option, is, and has been at
all times since the Grant Date, an employee or officer of, or consultant or
advisor to, the Company or any parent or subsidiary of the Company as defined in
Section 424(e) or (f) of the Code (an "Eligible Participant").
(c) Termination of Relationship with the Company. If the Participant ceases
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to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
three months after such cessation (but in no event after the Final Exercise
Date), provided that this option shall be exercisable only to the extent that
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the Participant was entitled to exercise this option on the date of such
cessation. Notwithstanding the foregoing, if the Participant, prior to the Final
Exercise Date, violates the non-competition or confidentiality provisions of any
employment contract, confidentiality and nondisclosure agreement or other
agreement between the Participant and the Company, the right to exercise this
option shall terminate immediately upon such violation.
(d) Exercise Period Upon Death or Disability. If the Participant dies or
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becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to
the Final Exercise Date while he or she is an Eligible Participant and the
Company has not terminated such relationship for "cause" as specified in
paragraph (e) below, this option shall be exercisable, within the period of one
year following the date of death or disability of the Participant, by the
Participant (or in the case of death by an authorized transferee), provided that
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this option shall be exercisable only to the extent that this option was
exercisable by the Participant on the date of his or her death or disability,
and further provided that this option shall not be exercisable after the Final
Exercise Date.
(e) Discharge for Cause. If the Participant, prior to the Final Exercise
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Date, is discharged by the Company for "cause" (as defined below), the right to
exercise this option shall terminate immediately upon the effective date of such
discharge. "Cause" shall mean willful misconduct by the Participant or willful
failure by the Participant to perform his or her responsibilities to the Company
(including, without limitation, breach by the Participant of any
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provision of any employment, consulting, advisory, nondisclosure,
non-competition or other similar agreement between the Participant and the
Company), as determined by the Company, which determination shall be conclusive.
The Participant shall be considered to have been discharged for "Cause" if the
Company determines, within 30 days after the Participant's resignation, that
discharge for cause was warranted.
4. Company Right of First Refusal.
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(a) Notice of Proposed Transfer. If the Participant proposes to sell,
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assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of
law or otherwise (collectively, "transfer") any Shares acquired upon exercise of
this option, then the Participant shall first give written notice of the
proposed transfer (the "Transfer Notice") to the Company. The Transfer Notice
shall name the proposed transferee and state the number of such Shares the
Participant proposes to transfer (the "Offered Shares"), the price per share and
all other material terms and conditions of the transfer.
(b) Company Right to Purchase. For 30 days following its receipt of such
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Transfer Notice, the Company shall have the option to purchase all or part of
the Offered Shares at the price and upon the terms set forth in the Transfer
Notice. In the event the Company elects to purchase all or part of the Offered
Shares, it shall give written notice of such election to the Participant within
such 30-day period. Within 10 days after his receipt of such notice, the
Participant shall tender to the Company at its principal offices the certificate
or certificates representing the Offered Shares to be purchased by the Company,
duly endorsed in blank by the Participant or with duly endorsed stock powers
attached thereto, all in a form suitable for transfer of the Offered Shares to
the Company. Promptly following receipt of such certificate or certificates, the
Company shall deliver or mail to the Participant a check in payment of the
purchase price for such Offered Shares; provided that if the terms of payment
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set forth in the Transfer Notice were other than cash against delivery, the
Company may pay for the Offered Shares on the same terms and conditions as were
set forth in the Transfer Notice; and provided further that any delay in making
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such payment shall not invalidate the Company's exercise of its option to
purchase the Offered Shares.
(c) Shares Not Purchased By Company. If the Company does not elect to
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acquire any of the Offered Shares, the Participant may, within the 30-day period
following the expiration of the option granted to the Company under subsection
(b) above, transfer the Offered Shares which the Company has not elected to
acquire to the proposed transferee, provided that such transfer shall not be on
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terms and conditions more favorable to the transferee than those contained in
the Transfer Notice. Notwithstanding any of the above, all Offered Shares
transferred pursuant to this Section 4 shall remain subject to the right of
first refusal set forth in this Section 4 and such transferee shall, as a
condition to such transfer, deliver to the Company a written instrument
confirming that such transferee shall be bound by all of the terms and
conditions of this Section 4.
(d) Consequences of Non-Delivery. After the time at which the Offered
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Shares are required to be delivered to the Company for transfer to the Company
pursuant to subsection (b) above, the Company shall not pay any dividend to the
Participant on account of such Offered Shares or permit the Participant to
exercise any of the privileges or rights of a stockholder with
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respect to such Offered Shares, but shall, in so far as permitted by law, treat
the Company as the owner of such Offered Shares.
(e) Exempt Transactions. The following transactions shall be exempt from
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the provisions of this Section 4:
(1) any transfer of Shares to or for the benefit of any spouse, child
or grandchild of the Participant, or to a trust for their benefit;
(2) any transfer pursuant to an effective registration statement filed
by the Company under the Securities Act of 1933, as amended (the "Securities
Act"); and
(3) the sale of all or substantially all of the shares of capital
stock of the Company (including pursuant to a merger or consolidation);
provided, however, that in the case of a transfer pursuant to clause (1) above,
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such Shares shall remain subject to the right of first refusal set forth in this
Section 4 and such transferee shall, as a condition to such transfer, deliver to
the Company a written instrument confirming that such transferee shall be bound
by all of the terms and conditions of this Section 4.
(f) Assignment of Company Right. The Company may assign its rights to
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purchase Offered Shares in any particular transaction under this Section 4 to
one or more persons or entities.
(g) Termination. The provisions of this Section 4 shall terminate upon the
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earlier of the following events:
(1) the closing of the sale of shares of Common Stock in an
underwritten public offering pursuant to an effective registration statement
filed by the Company under the Securities Act; or
(2) the sale of all or substantially all of the capital stock, assets
or business of the Company, by merger, consolidation, sale of assets or
otherwise (other than a merger or consolidation in which all or substantially
all of the individuals and entities who were beneficial owners of the Common
Stock immediately prior to such transaction beneficially own, directly or
indirectly, more than 75% of the outstanding securities entitled to vote
generally in the election of directors of the resulting, surviving or acquiring
corporation in such transaction).
(h) No Obligation to Recognize Invalid Transfer. The Company shall not be
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required (a) to transfer on its books any of the Shares which shall have been
sold or transferred in violation of any of the provisions set forth in this
Section 4, or (b) to treat as owner of such Shares or to pay dividends to any
transferee to whom any such Shares shall have been so sold or transferred.
(i) Legends. The certificate representing Shares shall bear a legend
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substantially in the following form (in addition to, or in combination with, any
legend required by applicable federal and state securities laws and agreements
relating to the transfer of the Company securities):
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"The shares represented by this certificate are subject to a
right of first refusal in favor of the Company, as provided in a
certain stock option agreement with the Company."
5. Agreement in Connection with Public Offering.
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The Participant agrees, in connection with the initial underwritten public
offering of the Company's securities pursuant to a registration statement under
the Securities Act, (i) not to sell, make short sale of, loan, grant any options
for the purchase of, or otherwise dispose of any shares of Common Stock held by
the Participant (other than those shares included in the offering) without the
prior written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for a period of 180
days from the effective date of such registration statement, and (ii) to execute
any agreement reflecting clause (i) above as may be requested by the Company or
the managing underwriters at the time of such offering.
6. Tax Matters.
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(a) Withholding. No Shares will be issued pursuant to the exercise of this
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option unless and until the Participant pays to the Company, or makes provision
satisfactory to the Company for payment of, any federal, state or local
withholding taxes required by law to be withheld in respect of this option.
Except as the Board may otherwise provide, when the Common Stock is registered
under the Exchange Act, Participants may satisfy such tax obligations in whole
or in part by delivery of shares of Common Stock, including shares retained from
the award creating the tax obligation, valued at their Fair Market Value;
provided, however, that the total tax withholding where stock is being used to
satisfy such tax obligations cannot exceed the Company's minimum statutory
withholding obligations (based on minimum statutory withholding rates for
federal and state tax purposes, including payroll taxes, that are applicable to
such supplemental taxable income).
(b) Disqualifying Disposition. If the Participant disposes of Shares
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acquired upon exercise of this option within two years from the Grant Date or
one year after such Shares were acquired pursuant to exercise of this option,
the Participant shall notify the Company in writing of such disposition.
7. Nontransferability of Option.
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This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
8. Provisions of the Plan.
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This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.
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IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take effect
as a sealed instrument.
STRONGHOLD TECHNOLOGIES, INC.
Dated: By:
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Name:
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Title:
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PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms
and conditions thereof. The undersigned hereby acknowledges receipt of a copy of
the Company's 2002 California Stock Incentive Plan.
PARTICIPANT:
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Address:
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NOTICE OF STOCK OPTION EXERCISE
Date:
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Stronghold Technologies, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Dear Xxxxx:
I am the holder of an incentive Stock Option granted to me under the
Stronghold Technologies, Inc.("Stronghold") 2002 California Stock Incentive Plan
on for the purchase of shares of Stronghold common stock
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at a purchase price of $ per share.
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I hereby exercise my option to purchase shares of Stronghold
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common stock (the "Shares"), for which I have enclosed in the amount
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of . Please register my stock certificate as follows:
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Name(s):
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Address:
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Tax I.D. #:
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I represent, warrant and covenant as follows:
1. I am purchasing the Shares for my own account for investment only, and
not with a view to, or for sale in connection with, any distribution of the
Shares in violation of the Securities Act of 1933 (the "Securities Act"), or any
rule or regulation under the Securities Act.
2. I have had such opportunity as I have deemed adequate to obtain from
representatives of the Company such information as is necessary to permit me to
evaluate the merits and risks of my investment in the Company.
3. I have sufficient experience in business, financial and investment
matters to be able to evaluate the risks involved in the purchase of the Shares
and to make an informed investment decision with respect to such purchase.
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4. I can afford a complete loss of the value of the Shares and am able to
bear the economic risk of holding such Shares for an indefinite period.
5. I understand that (i) the Shares have not been registered under the
Securities Act and are "restricted securities" within the meaning of Rule 144
under the Securities Act, (ii) the Shares cannot be sold, transferred or
otherwise disposed of unless they are subsequently registered under the
Securities Act or an exemption from registration is then available; (iii) in any
event, the exemption from registration under Rule 144 will not be available for
at least one year and even then will not be available unless a public market
then exists for the Common Stock, adequate information concerning the Company is
then available to the public, and other terms and conditions of Rule 144 are
complied with; and (iv) there is now no registration statement on file with the
Securities and Exchange Commission with respect to any stock of the Company and
the Company has no obligation or current intention to register the Shares under
the Securities Act.
Very truly yours,
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(Signature)
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(Signature)
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