Form of Cambridge Display Technology, Inc.



  
 Exhibit 10.40.1 
  
 STOCK OPTION AGREEMENT 
  
 STOCK OPTION AGREEMENT dated as of the Grant Date (as hereafter defined), by
and between CAMBRIDGE DISPLAY TECHNOLOGY, INC., a Delaware corporation (the “Company”), and the grantee whose name appears on the signature page hereof (the “Grantee”). 
  
 W I T N E S S E
T H: 
  
 WHEREAS, to motivate certain key employees,
consultants and directors of the Company and the Subsidiaries by providing them an ownership interest in the Company, the Board of Directors of the Company (the “Board”) has established and the shareholders of the Company have
approved, the Cambridge Display Technology, Inc. 2004 Stock Incentive Plan, as the same may be amended from time to time, (the “Plan”); and 
  
 WHEREAS, pursuant to the Plan, the Compensation Committee of the Board (the “Committee”) has authorized the grant to the Grantee of
non-qualified stock options to purchase the aggregate number of shares of Common Stock set forth on the signature page hereof (each, a “Share” and, collectively, the “Shares”), at the exercise price per Share listed
on Schedule A hereto under the heading “Exercise Price;” and 
  
 WHEREAS, the Grantee and the Company desire to enter into an agreement to evidence and confirm the grant of such stock options on the terms and conditions set forth herein. 
  
 NOW, THEREFORE, to evidence the stock options so granted, and to set forth the terms and conditions governing such stock
options, the Company and the Grantee hereby agree as follows: 
  
 1. Certain Definitions. Capitalized terms used herein without definition shall have the meanings set forth in the Plan. As used in this Agreement, the following terms shall have the following meanings:

  
 (a) “Aggregate Exercise
Price” shall have the meaning set forth in Section 6 hereof. 
  
 (b) “Alternative Award” shall have the meaning set forth in Section 7(c) hereof. 
  
 (c) “Covered Options” shall have the meaning set forth in Section 4(b) hereof. 
  









 (d) “Exercise Date” shall have the meaning set forth in Section 6
hereof. 
  
 (e) “Exercise Price”
shall mean, with respect to each Share covered by an Option, the exercise price at which the Grantee may purchase such Share specified in Section 2(b) hereof. 
  

(f) “Exercise Shares” shall have the meaning set forth in Section 6 hereof. 
  
 (g) “Exit Options” shall mean that number
of Options set forth under the heading “Exit Options” on Schedule A, to which the vesting criteria set forth under the heading “Vesting—Exit Options” on Schedule A shall apply. 
  
 (h) “Grant Date” shall mean the date
specified on Schedule A hereto under the heading “Grant Date,” which is the date on which the Options are granted to the Grantee. 
  
 (i) “Grantee” shall have the meaning set forth in the introductory paragraph hereto. 
  
 (j) “Normal Expiration Date” shall mean the
tenth anniversary of the date hereof. 
  
 (k)
“Option” shall mean the right granted to the Grantee hereunder to purchase one share of Common Stock for a purchase price equal to the Exercise Price and otherwise subject to the terms and conditions of this Agreement. 

 
 (l) “Securities Act” shall mean the U.S.
Securities Act of 1933, as amended. 
  
 (m)
“Service Options” shall mean that number of Options set forth under the heading “Service Options” on Schedule A, to which the vesting criteria set forth under the heading “Vesting—Service Options” on
Schedule A shall apply. 
  
 (n)
“Share” or “Shares” shall have the meaning specified in the preambles hereto. 
  
 2. Grant of Options. 
  
 (a) Confirmation of Grant. The Company hereby evidences and confirms its grant to the Grantee, effective as of the date hereof, of
Options to purchase the number of Shares specified on the signature page hereof under the 

  

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heading “Options.” The number of Options that are Exit Options and the number of Options that are Service Options are specified on Schedule A under
the headings “Exit Options” and “Service Options”, respectively. The Options are not intended to be incentive stock options under the U.S. Internal Revenue Code of 1986, as amended. This Agreement is subordinate to, and the terms
and conditions of the Options granted hereunder are subject to, the terms and conditions of the Plan, which are incorporated by reference herein. If there is any inconsistency between the terms hereof and the terms of the Plan, the terms of the Plan
shall govern. 
  
 (b) Exercise Price. Each
Share covered by an Option shall have the Exercise Price specified on Schedule A hereto under the heading “Exercise Price”, subject to adjustment as provided in the Plan. 
  
 3. Exercisability. 
  
 (a) Options. Except as otherwise provided in Section 7(a) of this Agreement and subject to the
continuous employment of the Grantee with the Company or one or more of the Subsidiaries until the applicable vesting date, the Options shall become vested as specified on Schedule A hereto under the heading “Vesting Schedule—Exit
Options” or “Vesting Schedule—Service Options”, as applicable. 
  
 (b) Conditions. The Committee, in its sole discretion, may accelerate the vesting or exercisability of any Option, all Options or
any class of Options, at any time and from time to time. Shares covered by vested Options may, subject to the provisions hereof, be purchased at any time and from time to time on or after the date the corresponding Options become vested in
accordance with the provisions of this Section 3 until the date one day prior to the date on which such Options terminate. 
  
 4. Termination of Options. 
  
 (a) Normal Expiration Date. Subject to Sections 4 and 7, the Options shall be forfeited and cancelled on the Normal Expiration
Date. 
  
 (b) Early Termination.

  
 (i) Except as provided in this Section 4 and
Section 7, if the Grantee’s employment with the Company or any Subsidiary is voluntarily or involuntarily terminated for any reason prior to the Normal Expiration Date, any Options held by the Grantee that have not become vested on or before
the effective date of such termination of employment shall be forfeited and cancelled immediately upon such termination of 

  

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employment. For purposes of the Plan, all Options held by the Grantee on the effective date of Grantee’s termination of employment that shall have
become vested on or before such effective date shall be referred to as the “Covered Options.” 
  
 (ii) Notwithstanding anything to the contrary contained herein, but subject to the provisions of Section 7, following a termination of
Grantee’s employment by reason of such Grantee’s Qualifying Termination of Employment, all of the Grantee’s Service Options (whether or not then vested or exercisable) shall become immediately exercisable in full and shall remain
exercisable solely until the first to occur of (A) the twelve-month anniversary of the date of such termination of employment, or (B) the Normal Expiration Date, and shall automatically be forfeited and cancelled upon the expiration of
whichever of such periods is applicable. Upon a Qualifying Termination of Employment, any Exit Options that are not then exercisable shall terminate as of the date of such Qualifying Termination of Employment and be canceled as of such termination
of employment. Any such Exit Options that became exercisable on or before the date of such termination shall remain exercisable solely until the first to occur of (A) the twelve-month anniversary of the date of such termination of employment,
or (B) the Normal Expiration Date, and shall automatically be forfeited and cancelled upon the expiration of whichever of such periods is applicable. 
  
 (iii) Subject to the provisions of Section 7, if the Grantee’s employment is terminated for any reason other than a Qualifying
Termination of Employment or for Cause, the Covered Options shall remain exercisable solely until the first to occur of (A) the 60th day following the date of such termination and (B) the Normal Expiration Date, and shall be forfeited and cancelled upon the expiration of whichever of such periods is applicable. 
  
 (iv) Notwithstanding anything else contained in this
Agreement, if the Grantee’s employment with the Company or any Subsidiary is terminated for Cause (or if, following the date of termination of the Grantee’s employment for any reason, the Committee determines that circumstances exist such
that the Grantee’s employment could have been terminated for Cause), all Options (whether or not then vested or exercisable) shall be forfeited and cancelled immediately upon such termination. 
  

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 5. Restrictions on Exercise; Non-Transferability of Options. 
  
 (a) Restrictions on Exercise. Once vested in
accordance with the provisions of this Agreement, the Options may be exercised only with respect to full shares of Common Stock. No fractional shares of Common Stock shall be issued. Notwithstanding any other provision of this Agreement, the Options
may not be exercised in whole or in part, and no certificates representing Shares shall be delivered, (i) unless all requisite approvals and consents of any governmental authority of any kind having jurisdiction over the exercise of the
Options shall have been secured, and (ii) unless Section 5(c) shall have been satisfied. 
  
 (b) Non-Transferability of Options. The Options may be exercised only by the Grantee or, following his death, by the Grantee’s
estate. The Options are not assignable or transferable, in whole or in part, and may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including without
limitation by gift, operation of law or otherwise) other than by will or by the laws of descent and distribution to the estate of the Grantee upon the Grantee’s death, provided that the deceased Grantee’s beneficiary or the representative
of the Grantee’s estate shall acknowledge and agree in writing, in a form reasonably acceptable to the Company, to be bound by the provisions of this Agreement and the Plan as if such beneficiary or the estate were the Grantee. 
  
 (c) Withholding; U.K. National Insurance
Contributions. Whenever Shares are to be issued pursuant to the Options, the Company may require the recipient of the Shares to remit to the Company an amount in cash sufficient to satisfy the statutory minimum U.S. federal, state and local and
non-U.S. tax withholding requirements and U.K. National Insurance Contributions and similar federal, state, local and non-U.S. charges as a condition to the issuance of such Shares. In the event any cash is paid to the Grantee or the Grantee’s
estate or beneficiary pursuant to Section 7 hereof or Article IX of the Plan, the Company shall have the right to withhold an amount from such payment sufficient to satisfy the statutory minimum U.S. federal, state and local and non-U.S. tax
withholding requirements and U.K. National Insurance Contributions and similar federal, state, local and non-U.S. charges. The Committee may, in its discretion, require or permit the Grantee to elect, subject to such conditions as the Committee
shall impose, to meet such obligations by having the Company withhold the least number of Shares having a Fair Market Value sufficient to satisfy all or part of the Grantee’s estimated total statutory minimum U.S. federal, state, and local and
non-U.S. tax obligations and U.K. National Insurance Contributions and similar federal, state, local and non-U.S. charges with respect to the issuance of Shares upon exercise of Options. At any time before the exercise, assignment, cancellation or
release of any Options, a Grantee may be required by the 

  

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Company or any Subsidiary to enter into: (x) a joint election to transfer liability for U.K. National Insurance Contributions with respect to such
Options to such Grantee in a form approved by the Inland Revenue and acceptable to the Company or such Subsidiary and (y) such arrangements as may be approved by the Inland Revenue in order to secure the transfer of such liability.

  
 6. Manner of Exercise. To the extent
that any outstanding Options shall have become and remain vested and exercisable as provided in Sections 3 and 4 and subject to such reasonable administrative regulations as the Committee may have adopted, such Options may be exercised, in whole or
in part, by notice to the Secretary of the Company in writing given at least 3 business days prior to the date as of which the Grantee will so exercise the Options (the “Exercise Date”), specifying the number of whole Shares with
respect to which the Options are being exercised (the “Exercise Shares”) and the Aggregate Exercise Price (as defined below) for such Exercise Shares. On or before the Exercise Date, the Grantee (i) shall deliver to the
Company full payment for the Exercise Shares in cash, or cash equivalents satisfactory to the Company, and in an amount equal to the product of the number of Exercise Shares, multiplied by the Exercise Price (such product, the “Aggregate
Exercise Price”) and (ii) the Company shall deliver to the Grantee a certificate or certificates representing the Exercise Shares and registered in the name of the Grantee. In lieu of tendering cash, the Grantee may tender shares of
Common Stock having an aggregate Fair Market Value on the Exercise Date equal to the Aggregate Exercise Price or may deliver a combination of cash and such shares of Common Stock having an aggregate Fair Market Value equal to the difference between
the Aggregate Exercise Price and the amount of such cash as payment of the Aggregate Exercise Price, subject to such rules and regulations as may be adopted by the Committee to provide for the compliance of such payment procedure with applicable
law, including Section 16(b) of the Exchange Act. The Company may require the Grantee to furnish or execute such other documents as the Company shall reasonably deem necessary (i) to evidence such exercise and (ii) to comply with or
satisfy the requirements of the Securities Act, applicable state or non-U.S. securities laws or any other law. 
  
 7. Change in Control. 
  
 (a) Options. Subject to Section 7(c), in the event of a Change in Control, all of the Options outstanding immediately prior to the
consummation of the transaction constituting the Change in Control (regardless of whether such Options are at such time otherwise vested or exercisable) shall become exercisable or, at the discretion of the Committee, any or all of such Options
shall be canceled in exchange for a payment in accordance with Section 7(b) of an amount equal to the product of (i) the Change in Control Price over the Exercise Price, multiplied by (ii) the aggregate number of Shares covered by all
such Options immediately prior to the Change in Control. 
  

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 (b) Timing of Option Cancelation Payments. Payment of the amount calculated in
accordance with Section 7(a) shall be made in cash or, if determined by the Committee (as constituted immediately prior to the Change in Control), in shares of the common stock of the Grantee’s new employer having an aggregate fair market value
equal to such amount and shall be payable in full, as soon as reasonably practicable, but in no event later than 30 days, following the Change in Control. For purposes hereof, the fair market value of a share of common stock of the Grantee’s
new employer shall be determined by the Committee (as constituted immediately prior to the Change in Control), in good faith. 
  
 (c) Alternative Options. Notwithstanding Sections 7(a) and 7(b), no cancellation, termination, acceleration of exercisability or
vesting or settlement or other payment shall occur with respect to any Option if the Committee (as constituted immediately prior to the consummation of the transaction constituting the Change in Control) reasonably determines, in good faith, prior
to the Change in Control that the Options shall be honored or assumed, or new rights substituted therefor (such honored, assumed or substituted Option being hereinafter referred to as an “Alternative Option”) by the Grantee’s
new employer, provided that any Alternative Options must: 
  
 (i) be based on stock which is traded on an established securities market, or which will be so traded within 60 days of the Change in Control; 
  
 (ii) provide the Grantee with rights and entitlements substantially equivalent to or better than the rights,
terms and conditions applicable under the terms of the Options immediately prior to the consummation of the transaction constituting the Change in Control, including, but not limited to, an identical or better exercise and vesting schedule and
identical or better timing and methods of exercise or payment; 
  
 (iii) have substantially equivalent economic value to the Options (determined at the time of the Change in Control); and 
  
 (iv) have terms and conditions which provide that in the event that the Grantee’s employment is involuntarily terminated or
constructively terminated, any conditions on the Grantee’s rights under, or any restrictions on transfer or exercisability applicable to, each such Alternative Option shall be waived or shall lapse, as the case may be. 
  
 8. No Rights as Stockholder. The Grantee shall have
no voting or other rights as a stockholder of the Company with respect to any Shares covered by the 

  

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Options until the exercise of the Options and the issuance of a certificate or certificates to the Grantee for such Shares. No adjustment shall be made for
dividends in cash or property or distributions or other rights in respect to any such Shares for which the record date is prior to the issuance of such certificate or certificates. 
  
 9. Capital Adjustments. Subject to the terms of the Plan, in the event of any Adjustment Event
affecting the Common Stock such that an adjustment is required to preserve, or to prevent enlargement of the benefits or potential benefits made available to the Grantee under the Plan or this Agreement, then the Committee shall, in such manner as
the Committee shall deem equitable, adjust any or all of the number and kind of shares of Common Stock covered by the Options and the grant, exercise or conversion price with respect to such Options. In addition, the Committee may make provision for
a cash payment to the Grantee. The number of shares of Common Stock subject to any Option shall be rounded to the nearest whole number. 
  
 10. Miscellaneous. 
  
 (a) Notices. All notices and other communications required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been given if delivered personally or sent by certified or express mail, return receipt requested, postage prepaid, or by any recognized international equivalent of such delivery, to the Company or the Grantee, as the case
may be, at the following addresses or to such other address as the Company or the Grantee, as the case may be, shall specify by notice to the others: 
  
 (i) if to the Company, to it at: 
  
 [______________________ 
 _______________________ 
 _______________________ 
 Attention: ______________] 
  
 (ii) if to the Grantee, to the Grantee at the address set forth on Schedule A hereto. 
  
 All such notices and communications shall be deemed to have been received on the date of
delivery if delivered personally or on the third business day after the mailing thereof, provided that the party giving such notice or communication shall have attempted to telephone the party or parties to which notice is being given during regular
business hours on or before the day such notice or communication is being sent, to advise such party or parties that such notice is being sent. 
  
 (b) Binding Effect; Benefits. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and
their respective 

  

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successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this
Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein. 
  
 (c) Waiver; Amendment. 
  
 (i) Waiver. Any party hereto or beneficiary hereof may by written notice to the other parties
(A) extend the time for the performance of any of the obligations or other actions of the other parties under this Agreement, (B) waive compliance with any of the conditions or covenants of the other parties contained in this Agreement
and (C) waive or modify performance of any of the obligations of the other parties under this Agreement. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party or beneficiary, shall be deemed to constitute a waiver by the party or beneficiary taking such action of compliance with any representations, warranties, covenants or agreements contained herein. The waiver
by any party hereto or beneficiary hereof of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by a party or beneficiary to exercise any right or privilege
hereunder shall be deemed a waiver of such party’s or beneficiary’s rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times
hereunder. 
  
 (ii) Amendment. This
Agreement may not be amended, modified or supplemented orally, except by a written instrument executed by the Grantee and the Company. Notwithstanding the foregoing or any other provision of this Agreement, the Committee may in its absolute
discretion alter or amend any of the provisions of the Plan or this Agreement if such alteration or amendment would be required to comply with Section 409A of the Internal Revenue Code or any regulations promulgated thereunder. 
  
 (d) Assignability. Neither this Agreement nor any
right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or the Grantee without the prior written consent of the other parties; provided that the Company may assign all or any portion of its
rights hereunder to one or more persons or other entities designated by it in connection with a Change in Control of the Company. 
  

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 (e) Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS WHICH WOULD REQUIRE APPLICATION OF THE LAW OF ANOTHER JURISDICTION. 
  
 (f) Consent to Electronic Delivery. By executing this Agreement, Grantee hereby consents to the
delivery of information (including, without limitation, information required to be delivered to the Grantee pursuant to applicable securities laws) regarding the Company and the Subsidiaries, the Plan, the Options and the Shares subject to the
Options via electronic mail, Company web site or other electronic delivery. 
  
 (g) Severability; Blue Pencil. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not be affected thereby. Grantee and the Company agree that the covenants contained in this Agreement are reasonable covenants under the circumstances, and further agree that if, in
the opinion of any court of competent jurisdiction such covenants are not reasonable in any respect, such court shall have the right, power and authority to excise or modify such provision or provisions of these covenants as to the court shall
appear not reasonable and to enforce the remainder of these covenants as so amended. 
  
 (h) Headings and Capitions. The headings and captions herein are provided for reference and convenience only and shall not be
employed in the construction of this Agreement. 
  
 (i) No Guarantee of Employment. Nothing in this Agreement shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate the Grantee’s employment at any time, nor to confer upon the Grantee any
right to continue in the employ of the Company or any Subsidiary. 
  
 (j) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

  
 (k) Delegation. All of the powers,
duties and responsibilities of the Committee specified in this Agreement may, to the full extent permitted by applicable law, be exercised and performed by the Board of Directors of the Company or any duly constituted committee thereof to the extent
authorized by the Board or the Committee to exercise and perform such powers, duties and responsibilities. 
  

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 (l) Gender and Number. Except when otherwise indicated by the context, words in
the masculine gender used herein shall include the feminine gender, the singular shall include the plural, and the plural shall include the singular. 
  
 -Signature page follows- 
  

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 IN WITNESS WHEREOF, the Company and the Grantee have executed this Agreement as of the Grant Date.

  

			
	CAMBRIDGE DISPLAY TECHNOLOGY, INC.
		
	By:	 	 
	 	 	 Name:
 Title:



  

			
	THE GRANTEE:
		
	 	 	 
	Name:	 	«Name»


  









 Schedule A 
  
 Option Grant Information 
  

			
	Grantee	 	[Name]
	Grantee Address	 	[Address]
	Grantee E-mail Address	 	[E-mail Address]
	Grant Date	 	[Grant Date]
	Exit Options	 	[Number of Exit Options]
	Service Options	 	[Number of Service Options]
	Exercise Price	 	$[Exercise Price]
	Vesting Schedule—Exit Options	 	[______________]
	Vesting Schedule—Service Options	 	[_______________]

  

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