<PAGE>
As filed with the Securities and Exchange Commission on August 8, 1997
Registration No. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CONCENTRIC NETWORK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 65-0257497
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
CONCENTRIC NETWORK CORPORATION
10590 NORTH TANTAU AVENUE
CUPERTINO, CA 95014
(408) 342-2800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
INCENTIVE STOCK OPTION PLAN
1995 STOCK INCENTIVE PLAN FOR EMPLOYEES AND CONSULTANTS
OPTION AGREEMENTS
AMENDED AND RESTATED 1996 STOCK PLAN
1997 STOCK PLAN
1997 EMPLOYEE STOCK PURCHASE PLAN
(FULL TITLE OF THE PLAN)
MICHAEL F. ANTHOFER
CHIEF FINANCIAL OFFICER
CONCENTRIC NETWORK CORPORATION
10590 NORTH TANTAU AVENUE
CUPERTINO, CA 95014
(408) 342-2800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
Copy to:
DAVID J. SEGRE, ESQ.
VICTOR H. SIM, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(415) 493-9300
Approximate date of commencement of proposed sale to the public: as soon
as practicable after the Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plan, please check the following
line: __________
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following line: X
----------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================
TITLE OF MAXIMUM PROPOSED PROPOSED AMOUNT OF
SECURITIES AMOUNT MAXIMUM MAXIMUM REGISTRATION
TO BE TO BE OFFERING AGGREGATE FEE
REGISTERED REGISTERED PRICE PER OFFERING
SHARE PRICE
<S> <C> <C> <C> <C>
Common Stock , 53,344 shares(1) $12.45 (2) $ 664,132.80 $ 201.26
$0.001 par value
Common Stock , 344,296 shares(3) $ 3.75 (2) $ 1,291,110.00 $ 391.25
$0.001 par value
Common Stock , 536,249 shares(4) $ 4.09 (2) $ 2,193,258.41 $ 664.63
$0.001 par value..
Common Stock , 948,764 shares(5) $ 6.40 (2) $ 6,072,089.60 $ 1,840.03
$0.001 par value..
Common Stock , 1,500,000 shares(6) $13.875 (7) $20,812,500.00 $ 6,306.82
$0.001 par value..
Common Stock , $11.800 (9) $ 5,900,000.00 $ 1,787.88
$0.001 par value.. 500,000 shares(8)
TOTAL: 3,882,653 shares $36,933,090.81 $11,191.87
================================================================================================================
</TABLE>
(1) For the sole purpose of calculating the registration fee, the number of
shares to be registered under this Registration Statement has been broken
down into six sub-totals. This sub-total represents the sum of shares
issuable upon exercise of presently outstanding options (options that have
been granted as of the date of this Registration Statement) issued under the
Incentive Stock Option Plan.
(2) Computed in accordance with Rule 457(h) under the Securities Act of 1933, as
amended, solely for the purpose of calculating the total registration fee.
Computation based on the average exercise price (rounded to nearest cent) at
which the options outstanding whose exercise will result in the issuance of
the shares being registered may be exercised.
(3) This sub-total represents the sum of shares issuable upon exercise of
presently outstanding options (options that have been granted as of the date
of this Registration Statement) issued under the 1995 Stock Incentive Plan
for Employees and Consultants.
(4) This sub-total represents the sum of shares issuable upon exercise of
presently outstanding options (options that have been granted as of the date
of this Registration Statement) issued under Option Agreements between the
Company and certain optionholders.
(5) This sub-total represents the sum of shares issuable upon exercise of
presently outstanding options (options that have been granted as of the date
of this Registration Statement) issued under the Amended and Restated 1996
Stock Plan.
(6) This sub-total represents the number of shares authorized to be issued
under the 1997 Stock Plan.
(7) Estimated in accordance with Rule 457(h) under the Securities Act of 1933,
as amended, solely for the purpose of calculating the total registration
fee. Computation based upon the average of the high and low prices of the
Common Stock as 1997. reported on the Nasdaq National Market on August 7,
(8) This sub-total represents the number of shares authorized to be issued
under the 1997 Employee Stock Purchase Plan.
(9) Estimated in accordance with rule 457(h) under the Securities Act of 1933,
as amended, solely for the purpose of calculating the total registration
fee. Computation based upon 85% (see explanation in following sentence) of
the average of the high and low prices of the Common Stock as reported on
the Nasdaq National Market on August 7, 1997 because the price at which the
the shares will be issued in the future is not currently determinable,
pursuant to the 1997 Employee Stock Purchase Plan, which plan is
incorporated by reference herein.
<PAGE>
PROSPECTUS
- ----------
CONCENTRIC NETWORK CORPORATION
--------------------------------
INCENTIVE STOCK OPTION PLAN
--------------------------------
This Prospectus relates to shares of common stock (the "Common Stock") of
Concentric Network Corporation (the "Company") offered to key employees and
other persons affiliated with the Company pursuant to options granted under the
Company's Incentive Stock Option Plan (the "1993 Plan"). The terms and
conditions of grants made pursuant to the 1993 Plan, including the prices of the
shares of Common Stock, are governed by the provisions of the1993 Plan and the
agreements thereunder.
---------------------------
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
SECURITIES THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
---------------------------
The Company's executive offices are located at 10590 North Tantau Avenue,
Cupertino, California 95014, and its telephone number at that location is (408)
342-2800.
The date of this Prospectus is Friday, August 8, 1997
-----------------------------------------------------
<PAGE>
This Prospectus contains information concerning the Company and the 1993
Plan but does not contain all the information set forth in the Registration
Statement on Form S-8 for the 1993 Plan which the Company has filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Securities Act"). The Registration Statement, including the exhibits
thereto, may be inspected at the Commission's office in Washington, D.C. In
addition, the Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the Commission's Web site is
http:\\www.sec.gov.
The Company will undertake to provide without charge to each person to whom
a copy of this Prospectus is delivered, upon written or oral request of any such
person, (i) a copy of any and all of the information that has been or may be
incorporated by reference in this Prospectus, other than exhibits to such
documents, and (ii) a copy of any other documents required to be delivered to
optionees under the 1993 Plan pursuant to Rule 428(b) under the Securities Act,
including the Company's most recent Annual Report to Shareholders, proxy
statement and other communications distributed to its shareholders generally.
Requests for such copies and requests for additional information about the 1993
Plan and its Administrator should be directed to the Chief Financial Officer,
Concentric Network Corporation, 10590 North Tantau Avenue, Cupertino, CA 95014.
The Company's telephone number is (408) 342-2800.
Except for the person set forth in the foregoing paragraph, the Company has
not authorized any person to give any information or make any representations,
other than those contained in this Prospectus, in connection with the 1993 Plan.
If given or made, such information or representations must not be relied upon as
having been authorized by the Company. This Prospectus does not constitute an
offering in any state in which such offering may not lawfully be made.
-2-
<PAGE>
QUESTIONS AND ANSWERS ABOUT
CONCENTRIC NETWORK CORPORATION
INCENTIVE STOCK OPTION PLAN
WHAT IS THE INCENTIVE STOCK OPTION PLAN?
The Company's Incentive Stock Option Plan, (the "1993 Plan") was adopted by
the Board of Directors and approved by shareholders in 1993 to enable key
employees and other persons affiliated with the Company or any parent or
subsidiary to own stock in the Company.
The 1993 Plan is not a qualified deferred compensation plan under 401(a) of
the Code nor is it subject to the provisions of the Employee Retirement Income
Security Act of 1974. The 1993 Plan will expire by its own terms in the year
2004, unless terminated sooner by the Board of Directors of the Company.
HOW MANY SHARES OF STOCK ARE RESERVED FOR ISSUANCE UNDER THE 1993 PLAN?
The Company has reserved a total of up to 666,666 shares of Common Stock
for issuance under this 1993 Plan.
WHO ADMINISTERS THE 1993 PLAN?
The 1993 Plan is administered by a Stock Option Committee (the
"Administrator") which consists of three members of the Board of Directors of
the Company (the "Board of Directors") who are appointed to the Administrator
from time to time.
The Administrator has final authority to interpret any provision of the
1993 Plan or any grant made under the 1993 Plan.
WHO IS ELIGIBLE TO PARTICIPATE IN THE OPTION 1993 PLAN?
Employees of the Company, or any parent or subsidiary of the Company, are
eligible to receive incentive stock options ("ISOs").
WHO SELECTS THE EMPLOYEES WHO RECEIVE GRANTS?
The Administrator selects the employees who receive options under the 1993
Plan, and, subject to the provisions of the 1993 Plan, determines the terms of
each such option.
<PAGE>
WHAT IS A STOCK OPTION?
An option is a right to buy stock in the future at a predetermined price.
ISOs are options that qualify for preferred tax treatment under Section 422 of
the Internal Revenue Code of 1986, as amended (the"Code").
Subject to the provisions of the 1993 Plan, the Administrator determines
the term of each option, the number of shares subject to each option, and the
time each option may be exercised. However, the term of an ISO may not exceed
ten years from the date of grant.
The Administrator also determines the option exercise price. However, the
exercise price of an ISO may not be less than the fair market value of the
Common Stock on the date of grant. Under certain circumstances, the exercise
price of an ISO may not be less than 110% of the fair market value on the date
of grant.
No option may be exercised after termination of employment of the Optionee
with the Company except as hereinafter provided. In the case of a
termination for disability, the period for exercise of an option following
termination generally will be three months. In the case of a termination for
death, the period for exercise following termination generally will be twelve
months. In no event may an option be exercised after the expiration of the
original term of the option.
The Administrator determines how an optionee may pay the exercise price of
an option. The 1993 Plan specifically states the following as an acceptable form
of consideration for the ISOs: cash and checks.
WHAT TERMS APPLY TO ALL OPTIONS?
Written Agreements. Options granted under the 1993 Plan are evidenced by a
------------------
written agreement between the Company and the employee.
Rule 16b-3. Awards granted to persons subject to Section 16 Insiders are
----------
subject to any additional applicable restrictions of Rule 16b-3. See
"Additional Considerations Applicable to Section 16 Insiders."
Non-transferability of Options. Subject to the discretion of the
------------------------------
Administrator, options granted under the 1993 Plan are generally non-
transferable by the participant, other than by will or the laws of descent and
distribution, and may generally be exercised during the lifetime of the
participant only by him or her.
Adjustment on Changes in Capitalization. In the event any change, such as
---------------------------------------
a stock split or dividend, is made in the Company's capitalization which results
in an increase or decrease in the number of issued shares of Common Stock
without receipt of consideration by the Company, an
<PAGE>
appropriate adjustment will be made in the price of each option and in the
number of shares subject to each option.
Effect of Dissolution or Liquidation of the Company. In the event of a
---------------------------------------------------
proposed dissolution or liquidation of the Company, the Administrator may, in
its discretion, provide that all outstanding options will become vested and
exercisable as to all shares subject to options, including shares as to which
the options would not otherwise be vested or exercisable.
Effect of Acquisition of the Company. In the event of the merger of the
------------------------------------
Company with or into another corporation, the Administrator may, in its
discretion, provide that all outstanding options will become vested and
exercisable as to all shares subject to options, including shares as to which
the options would not otherwise be vested or exercisable.
Amendment and Termination. The Board may amend, alter, suspend or
-------------------------
discontinue the 1993 Plan at any time, but such amendment, alteration,
suspension or discontinuation may not adversely affect any outstanding option
without the consent of the holder. To the extent necessary and desirable to
comply with Section 422 of the Code (or any other applicable law or regulation),
the Company must obtain shareholder approval of certain amendments to the 1993
Plan in the manner and to the degree required by such laws and regulations.
ADDITIONAL CONSIDERATIONS FOR "AFFILIATES" OF THE COMPANY
Certain officers and directors of the Company are considered "affiliates" of
the Company, as that term is defined in Rule 144(a) under the Securities Act.
Affiliates may resell Common Stock subject to the restrictions of Rule 144 or
pursuant to an effective registration statement. Rule 144 requires that resales
by affiliates satisfy the following conditions: (1) the resale must be made
through a broker in an unsolicited "broker's transaction" or in a direct
transaction with a "market maker," as those terms are defined under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); (2) certain
information about the Company must be publicly available; (3) the amount of
Common Stock sold in any three-month period must not exceed the limits of Rule
144(e); and, if applicable, a Form 144 must be timely filed with the Securities
and Exchange Commission. If the resale is pursuant to a registration statement,
it may not be made in reliance on the registration statement on Form S-8 filed
in connection with the issuance of the shares described in this prospectus.
<PAGE>
TAX INFORMATION
The following is a brief summary of the effect of U.S. federal income tax
laws upon options granted under the 1993 Plan based on U.S. federal securities
and income tax laws in effect on January 1, 1997.
THIS SUMMARY IS NOT INTENDED TO BE EXHAUSTIVE AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE PROVISIONS OF ANY INCOME TAX LAWS
OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH AN OPTIONEE MAY RESIDE.
AN OPTIONEE SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE TAXATION OF
THESE OPTIONS.
Incentive Stock Options. No taxable income is recognized by the optionee
-----------------------
upon the grant or exercise of an ISO (unless the alternative minimum tax rules
apply). If Common Stock is issued to an optionee pursuant to the exercise of an
ISO, and if no disqualifying disposition of the shares is made by the optionee
within two years after the date of grant or within one year after the issuance
of such shares to the optionee, then (i) upon the resale of such shares, any
amount realized in excess of the option exercise price will be treated as a
long-term capital gain and any loss sustained will be treated as a long-term
capital loss, and (ii) no deduction will be allowed to the Company for federal
income tax purposes.
If Common Stock acquired upon the exercise of an ISO is disposed of before
the expiration of either holding period described above, generally (i) the
optionee will recognize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of the shares at exercise
(or, if less, the amount realized on the disposition of the shares) over the
option exercise price paid for such shares, and (ii) the Company is entitled to
a tax deduction in the same amount. Any further gain or loss realized by the
participant will be taxed as short-term or long-term capital gain or loss, as
the case may be, and will not result in any deduction by the Company.
If an option designated as an ISO first becomes exercisable in any
calendar year for shares whose aggregate fair market value exceeds $100,000, the
exercise of such excess shares will be treated for income tax purposes as having
been acquired by the optionee pursuant to an NSO. For purposes of this rule,
(i) all ISOs granted by the Company to an optionee are aggregated, (ii) the fair
market value of an option share is its value on the date of grant of the option,
and (iii) options are taken into account in the order in which they are granted.
Alternative Minimum Tax. The exercise of an ISO granted under the 1993
-----------------------
Plan may subject the optionee to the alternative minimum tax ("AMT") under
Section 55 of the Code. In computing alternative minimum taxable income, shares
purchased upon exercise of an ISO are treated as if they had been acquired by
the optionee pursuant to an NSO. See "Nonstatutory Stock Options," below.
Under certain circumstances, an optionee may affect the timing and measurement
of AMT by filing an election with the Internal Revenue Service under Section
83(b) within 30 days after the date of exercise of an ISO. Accordingly, an
optionee should consult his or her own tax advisor prior to exer-
<PAGE>
cising an ISO concerning the advisability of filing an election under Section
83(b) of the Code for alternative minimum tax purposes.
If an optionee pays AMT in excess of his or her regular tax liability,
the amount of such AMT relating to ISOs may be carried forward as a credit
against any subsequent years' regular tax in excess of the AMT.
ADDITIONAL CONSIDERATIONS APPLICABLE TO SECTION 16 INSIDERS
All Section 16 Insiders are advised to consult with the Company's general
counsel and with their own personal advisors regarding reporting and liability
under Section 16 with respect to their transactions under the 1993 Plan.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents and information heretofore filed by the Company
with the Securities and Exchange Commission are hereby incorporated by
reference:
(a) The Company's Registration Statement on Form S-1 (File No. 333-27241)
and the exhibits thereto filed under the Securities Act of 1933, as
amended, in the form declared effective on July 31, 1997.
(b) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A12G (File No. 000-22575)
as filed with the Commission on July 25, 1997 filed pursuant to
Section 12 of the Securities Exchange Act of 1934.
(c) All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934
shall be deemed to be incorporated by reference in
this registration statement and to be part hereof from the date of
filing such documents.
<PAGE>
PROSPECTUS
CONCENTRIC NETWORK CORPORATION
-----------------
1995 STOCK INCENTIVE PLAN FOR EMPLOYEES AND CONSULTANTS
-----------------
This Prospectus relates to shares of common stock (the "Common Stock") of
Concentric Network Corporation (the "Company") offered to employees and
consultants of the Company and its subsidiaries pursuant to options granted
under the Company's 1995 Stock Incentive Plan for Employees and Consultants (the
"1995 Plan"). The terms and conditions of grants made pursuant to the 1995 Plan,
including the prices of the shares of Common Stock, are governed by the
provisions of the 1995 Plan and the agreements thereunder.
-----------------
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
SECURITIES THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
-----------------
The Company's executive offices are located at 10590 North Tantau Avenue,
Cupertino, California, 95014, and its telephone number at that location is (408)
342-2800.
The date of this Prospectus is Friday, August 8, 1997
-----------------------------------------------------
<PAGE>
This Prospectus contains information concerning the Company and the 1995
Plan but does not contain all the information set forth in the Registration
Statement on Form S-8 for the 1995 Plan which the Company has filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Securities Act"). The Registration Statement, including the exhibits
thereto, may be inspected at the Commission's office in Washington, D.C. In
addition, the Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the Commission's Web site is
http:\\www.sec.gov.
The Company will undertake to provide without charge to each person to whom
a copy of this Prospectus is delivered, upon written or oral request of any such
person, (i) a copy of any and all of the information that has been or may be
incorporated by reference in this Prospectus, other than exhibits to such
documents, and (ii) a copy of any other documents required to be delivered to
optionees under the 1995 Plan pursuant to Rule 428(b) under the Securities Act,
including the Company's most recent Annual Report to Shareholders, proxy
statement and other communications distributed to its shareholders generally.
Requests for such copies and requests for additional information about the 1995
Plan and its Administrator should be directed to the Chief Financial Officer,
Concentric Network Corporation, 10590 North Tantau Avenue, Cupertino, CA 95014.
The Company's telephone number is (408) 342-2800.
Except for the person set forth in the foregoing paragraph, the Company has
not authorized any person to give any information or make any representations,
other than those contained in this Prospectus, in connection with the 1995 Plan.
If given or made, such information or representations must not be relied upon as
having been authorized by the Company. This Prospectus does not constitute an
offering in any state in which such offering may not lawfully be made.
-2-
<PAGE>
QUESTIONS AND ANSWERS ABOUT
CONCENTRIC NETWORK CORPORATION
1995 STOCK INCENTIVE PLAN FOR EMPLOYEES AND CONSULTANTS
(AS AMENDED FEBRUARY 21, 1996)
WHAT IS THE 1995 STOCK INCENTIVE PLAN FOR EMPLOYEES AND CONSULTANTS?
The 1995 Plan was adopted by the Board of Directors (the "Board") and
approved by shareholders in 1995 to enable employees and consultants of the
Company and its subsidiaries to own stock in the Company and to take advantage
of the tax benefits allowed by the Internal Revenue Code to employer stock
option plans. An amendment decreasing the number of shares from 840,000 to
762,600 was approved by the Board of Directors in February 1996.
The 1995 Plan is not a qualified deferred compensation plan under 401(a) of
the Code nor is it subject to the provisions of the Employee Retirement Income
Security Act of 1974. The 1995 Plan will expire by its own terms in the year
2005, unless terminated sooner by the Board of the Company.
HOW MANY SHARES OF STOCK ARE RESERVED FOR ISSUANCE UNDER THE 1995 PLAN?
The Company has reserved a total of up to 762,600 shares of Common Stock
for issuance under the 1995 Plan.
WHO ADMINISTERS THE 1995 PLAN?
The 1995 Plan is administered by a Committee (the "Administrator")
appointed by the Board, which committee is required, once the Company's Common
Stock becomes publicly traded, to be constituted to comply with Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, and
applicable laws. The Administrator has the power to determine the terms of the
options granted, including the exercise price, the number of shares subject to
the option and the exercisability thereof, and the form of consideration payable
upon exercise.
WHO IS ELIGIBLE TO PARTICIPATE IN THE 1995 PLAN?
Employees and consultants of the Company, or any parent or subsidiary of
the Company, are eligible to receive nonstatutory stock options ("NSOs").
<PAGE>
Only employees of the Company, or any parent or subsidiary of the Company,
are eligible to receive incentive stock options ("ISOs").
WHO SELECTS THE EMPLOYEES AND CONSULTANTS WHO RECEIVE GRANTS?
The Administrator selects the employees and consultants who receive options
under the 1995 Plan. For purposes of the 1995 Plan, employees shall include
officers and directors who are also employees of the Corporation or any
Subsidiary.
WHAT TYPES OF GRANTS ARE PERMITTED UNDER THE 1995 PLAN?
The 1995 Plan provides for the granting of incentive stock options ("ISOs")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") to employees, and for the granting of nonstatutory stock
options ("NSOs"), stock appreciation rights ("SARs") and restricted stock awards
("RSAs") to employees and consultants. The "Tax Information" section summarizes
the tax treatment of each of these grants.
WHAT IS A STOCK OPTION?
An option is a right to buy stock in the future at a predetermined price.
ISOs are options that qualify for preferred tax treatment under Section 422 of
the Code. NSOs are options that do not qualify as ISOs.
Subject to the provisions of the 1995 Plan, the Administrator determines
the term of each option, the number of shares subject to each option, and the
time each option may be exercised. However, the term of an ISO may not exceed
ten years from the date of grant.
The Administrator also determines the option exercise price. However, the
exercise price of an ISO may not be less than the fair market value of the
Common Stock on the date of grant. Under certain circumstances, the exercise
price of an ISO may not be less than 110% of the fair market value on the date
of grant.
If an optionee's employment or consulting relationship terminates for any
reason other than death or disability, his or her options must generally be
exercised within a period of not less than thirty (30) days and no more than
three months following termination of employment with respect to ISOs and
related SARs; and with respect to NSOs and related SARs, options should be
exercised for a period not less than six (6) months and not longer than the
expiration date.
If termination of employment is due to the death of the disability of the
optionee, options may be exercised for a period of not less than six (6)
months nor more than one year following termination of employment with respect
to ISOs or related SARs; and with respect to NSOs and related SARs, options
should be exercised for a period not less than six (6) months and not longer
than the expiration date. However, if the disability does not qualify as a
"disability" as defined in Section 22(e)(3) of the Code, the ISO shall
automatically be
<PAGE>
treated as an NSO three (3) months and one day following such termination. In
no event shall a stock option or stock appreciation right be exercisable
subsequent to its expiration date and furthermore, a stock option or stock
appreciation right may only be exercised after termination of employment or
consultancy to the extent exercisable on the date of termination of employment
or consultancy.
The Committee determines how an optionee may pay the exercise price of an
option. The 1995 Plan specifically states that the following are acceptable
forms of consideration: cash, promissory note and certain other shares of Common
Stock.
WHAT TERMS APPLY TO ALL OPTIONS?
Written Agreements. Each stock option, stock appreciation right and
------------------
restricted stock award granted under the 1995 Plan are evidenced by a written
agreement between the Company and the employee or consultant to whom a stock
option, stock appreciation right and restricted stock award is granted.
Rule 16b-3. Awards granted to persons subject to Section 16 Insiders are
----------
subject to any additional applicable restrictions of Rule 16b-3. See
"Additional Considerations Applicable to Section 16 Insiders."
Non-transferability of Options. Subject to the discretion of the
------------------------------
Administrator, options granted under the 1995 Plan are generally non-
transferable by the participant, other than by will or the laws of descent and
distribution, and may generally be exercised during the lifetime of the
participant only by him or her.
Adjustment on Changes in Capitalization. In the event any change, such as
---------------------------------------
a stock split or dividend, is made in the Company's capitalization which results
in an increase or decrease in the number of issued shares of Common Stock
without receipt of consideration by the Company, an appropriate adjustment will
be made in the price of each option and in the number of shares subject to each
option. Such adjustment shall be made by the Board, whose determination in that
respect shall be final, binding and conclusive.
Effect of Dissolution or Liquidation of the Company. In the event of a
---------------------------------------------------
proposed dissolution or liquidation of the Company, the Administrator shall
notify each participant as soon as practicable prior to the effective date of
such proposed transaction. To the extent it has not been previously exercised, a
stock option, restricted stock award, or stock appreciation right will terminate
immediately prior to the consummation of such proposed action.
Effect of Acquisition of the Company. In the event of the merger of the
------------------------------------
Company with or into another corporation, or the sale of all or substantially
all of the Company's assets, each outstanding option, restricted stock award,
and stock appreciation right shall be assumed or an equivalent stock option,
restricted stock award, and stock appreciation right substituted by the
successor corporation (or a parent or subsidiary or such successor corporation).
If the successor corporation refuses to assume or substitute for the outstanding
options, restricted stock award, and stock appreciation right, then such
options, restricted stock award, and stock appreciation right shall terminate as
of the date of the closing of the merger.
<PAGE>
Amendment and Termination. The Board may amend or discontinue the 1995
-------------------------
Plan at any time, but such amendment, alteration, suspension or discontinuation
may not adversely affect any outstanding option, stock appreciation right and
restricted stock without the consent of the holder. Unless sooner terminated,
the 1995 Plan shall terminate on the date ten years after its adoption by the
Board of Directors, and no stock options, stock appreciation rights or
restricted stock may be granted or awarded thereafter.
ADDITIONAL CONSIDERATIONS FOR "AFFILIATES" OF THE COMPANY
Certain officers and directors of the Company are considered "affiliates"
of the Company, as that term is defined in Rule 144(a) under the Securities Act.
Affiliates may resell Common Stock subject to the restrictions of Rule 144 or
pursuant to an effective registration statement. Rule 144 requires that resales
by affiliates satisfy the following conditions: (1) the resale must be made
through a broker in an unsolicited "broker's transaction" or in a direct
transaction with a "market maker," as those terms are defined under the
Securities Exchange Act of 1934; (2) certain information about the Company must
be publicly available; (3) the amount of Common Stock sold in any three-month
period must not exceed the limits of Rule 144(e); and, if applicable, a Form 144
must be timely filed with the Securities and Exchange Commission. If the resale
is pursuant to a registration statement, it may not be made in reliance on the
registration statement on Form S-8 filed in connection with the issuance of the
shares described in this prospectus.
<PAGE>
TAX INFORMATION
The following is a brief summary of the effect of U.S. federal income tax
laws upon options granted under the 1995 Plan based on U.S. federal securities
and income tax laws in effect on January 1, 1997.
THIS SUMMARY IS NOT INTENDED TO BE EXHAUSTIVE AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE PROVISIONS OF ANY INCOME TAX LAWS
OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH AN OPTIONEE MAY RESIDE.
AN OPTIONEE SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE TAXATION OF
THESE OPTIONS.
Incentive Stock Options. No taxable income is recognized by the optionee
-----------------------
upon the grant or exercise of an ISO (unless the alternative minimum tax rules
apply). If Common Stock is issued to an optionee pursuant to the exercise of an
ISO, and if no disqualifying disposition of the shares is made by the optionee
within two years after the date of grant or within one year after the issuance
of such shares to the optionee, then (i) upon the resale of such shares, any
amount realized in excess of the option exercise price will be treated as a
long-term capital gain and any loss sustained will be treated as a long-term
capital loss, and (ii) no deduction will be allowed to the Company for federal
income tax purposes.
If Common Stock acquired upon the exercise of an ISO is disposed of before
the expiration of either holding period described above, generally (i) the
optionee will recognize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of the shares at exercise
(or, if less, the amount realized on the disposition of the shares) over the
option exercise price paid for such shares, and (ii) the Company is entitled to
a tax deduction in the same amount. Any further gain or loss realized by the
participant will be taxed as short-term or long-term capital gain or loss, as
the case may be, and will not result in any deduction by the Company.
If an option designated as an ISO first becomes exercisable in any calendar
year for shares whose aggregate fair market value exceeds $100,000, the exercise
of such excess shares will be treated for income tax purposes as having been
acquired by the optionee pursuant to an NSO. For purposes of this rule, (i) all
ISOs granted by the Company to an optionee are aggregated, (ii) the fair market
value of an option share is its value on the date of grant of the option, and
(iii) options are taken into account in the order in which they are granted.
Alternative Minimum Tax. The exercise of an ISO granted under the 1995
-----------------------
Plan may subject the optionee to the alternative minimum tax ("AMT") under
Section 55 of the Code. In computing alternative minimum taxable income, shares
purchased upon exercise of an ISO are treated as if they had been acquired by
the optionee pursuant to an NSO. See "Nonstatutory Stock Options," below.
Under certain circumstances, an optionee may affect the timing and measurement
of AMT by filing an election with the Internal Revenue Service under Section
83(b) within 30 days after the date of exercise of an ISO. Accordingly, an
optionee should consult his or her own tax advisor prior to exercising an ISO
concerning the advisability of filing an election
<PAGE>
under Section 83(b) of the Code for alternative minimum tax purposes.
If an optionee pays AMT in excess of his or her regular tax liability,
the amount of such AMT relating to ISOs may be carried forward as a credit
against any subsequent years' regular tax in excess of the AMT.
Nonstatutory Stock Options. With respect to NSOs: (i) no income is
--------------------------
recognized by the optionee at the time the option is granted; (ii) generally, at
exercise, ordinary income is recognized by the optionee in an amount equal to
the difference between the option exercise price paid for the shares and the
fair market value of the shares on the date of exercise; and (iii) upon
disposition of the shares, any gain or loss is treated as capital gain or loss.
The Company is entitled to a tax deduction in the same amount of ordinary income
the optionee recognizes in connection with the exercise of an NSO. In the case
of an optionee who is also an employee at the time of grant, any income
recognized upon exercise of an NSO will constitute wages for which withholding
will be required.
ADDITIONAL CONSIDERATIONS APPLICABLE TO SECTION 16 INSIDERS
All Section 16 Insiders are advised to consult with the Company's general
counsel and with their own personal advisors regarding reporting and liability
under Section 16 with respect to their transactions under the 1995 Plan.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents and information heretofore filed by the Company
with the Securities and Exchange Commission are hereby incorporated by
reference:
(a) The Company's Registration Statement on Form S-1 (File No. 333-27241)
and exhibits thereto filed under the Securities Act of 1933, as
amended, in the form declared effective on July 31, 1997.
(b) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A12G (File No. 000-22575)
as filed with the Commission on July 25, 1997 filed pursuant to
Section 12 of the Securities Exchange Act of 1934.
(c) All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934
shall be deemed to be incorporated by reference in this registration
statement and to be part hereof from the date of filing such
documents.
<PAGE>
PROSPECTUS
CONCENTRIC NETWORK CORPORATION
--------------------------------
AMENDED AND RESTATED 1996 STOCK PLAN
--------------------------------
This Prospectus relates to shares of common stock (the "Common Stock") of
Concentric Network Corporation (the "Company") offered to employees, directors
and consultants of the Company pursuant to options granted under the Company's
Amended and Restated 1996 Stock Plan (the "1996 Plan"). The terms and
conditions of grants made pursuant to the 1996 Plan, including the prices of the
shares of Common Stock, are governed by the provisions of the 1996 Plan and the
agreements thereunder.
---------------------------
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
SECURITIES THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
---------------------------
The Company's executive offices are located at 10590 North Tantau Avenue,
Cupertino, California, 95014, and its telephone number at that location is (408)
342-2800.
The date of this Prospectus is Friday, August 8, 1997
-----------------------------------------------------
<PAGE>
This Prospectus contains information concerning the Company and the 1996 Plan
but does not contain all the information set forth in the Registration Statement
on Form S-8 for the 1996 Plan which the Company has filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"). The Registration Statement, including the exhibits thereto,
may be inspected at the Commission's office in Washington, D.C. In addition, the
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the Commission's Web site is
http:\\www.sec.gov.
The Company will undertake to provide without charge to each person to whom
a copy of this Prospectus is delivered, upon written or oral request of any such
person, (i) a copy of any and all of the information that has been or may be
incorporated by reference in this Prospectus, other than exhibits to such
documents, and (ii) a copy of any other documents required to be delivered to
optionees under the 1996 Plan pursuant to Rule 428(b) under the Securities Act,
including the Company's most recent Annual Report to Shareholders, proxy
statement and other communications distributed to its shareholders generally.
Requests for such copies and requests for additional information about the 1996
Plan and its Administrator should be directed to the Chief Financial Officer,
Concentric Network Corporation, 10590 North Tantau Avenue, Cupertino, CA 95014.
The company's telephone number is (408) 342-2800.
Except for the person set forth in the foregoing paragraph, the Company has
not authorized any person to give any information or make any representations,
other than those contained in this Prospectus, in connection with the 1996 Plan.
If given or made, such information or representations must not be relied upon as
having been authorized by the Company. This Prospectus does not constitute an
offering in any state in which such offering may not lawfully be made.
-2-
<PAGE>
QUESTIONS AND ANSWERS ABOUT
CONCENTRIC NETWORK CORPORATION
AMENDED AND RESTATED 1996 STOCK PLAN
WHAT IS THE AMENDED AND RESTATED 1996 STOCK PLAN?
The 1996 Plan was initially approved by the Board of Directors (the
"Board") in December 1996. It was amended and restated and approved by the
Board and Shareholders in 1997.
The 1996 Plan is not a qualified deferred compensation plan under 401(a)
of the Code nor is it subject to the provisions of the Employee Retirement
Income Security Act of 1974. The 1996 Plan will expire by its own terms in the
year 2007, unless terminated sooner by the Board of the Company.
HOW MANY SHARES OF STOCK ARE RESERVED FOR ISSUANCE UNDER THE 1996 PLAN?
The Company has reserved a total of up to 1,100,000 shares of Common Stock
for issuance under the 1996 Plan.
WHO ADMINISTERS THE 1996 PLAN?
The 1996 Plan is administered by the Committee (the "Administrator")
appointed by the Board, which committee shall be constituted to comply with
Applicable Laws.
The Administrator has final authority to interpret any provision of the
1996 Plan or any grant made under the 1996 Plan.
WHO IS ELIGIBLE TO PARTICIPATE IN THE 1996 PLAN?
Employees, directors and consultants are eligible to receive nonstatutory
stock options ("NSOs") and stock purchase rights ("Rights").
Only employees of the Company, or any parent or subsidiary of the Company,
are eligible to receive incentive stock options ("ISOs").
<PAGE>
WHO SELECTS THE EMPLOYEES, DIRECTORS AND CONSULTANTS WHO RECEIVE GRANTS?
The Administrator selects the employees, directors and consultants
("Service Providers") who receive options under the 1996 Plan.
WHAT TYPES OF GRANTS ARE PERMITTED UNDER THE 1996 PLAN?
The 1996 Plan permits the Company to grant Incentive Stock Options,
Nonstatutory Stock Options, and Stock Purchase Rights. These grants are
described below. The "Tax Information" section summarizes the tax treatment of
each of these grants.
WHAT IS A STOCK OPTION?
An option is a right to buy stock in the future at a predetermined price.
ISOs are options that qualify for preferred tax treatment under Section 422 of
the Internal Revenue Code of 1986, as amended ( the "Code"). NSOs are options
that do not qualify as ISOs.
Subject to the provisions of the 1996 Plan, the Administrator determines
the term of each option, the number of shares subject to each option, and the
time each option may be exercised. However, the term of an ISO may not exceed
ten years from the date of grant.
The Administrator also determines the option exercise price. However, the
exercise price of an ISO may not be less than the fair market value of the
Common Stock on the date of grant. Under certain circumstances, the exercise
price of an ISO may not be less than 110% of the fair market value on the date
of grant.
If an Optionee ceases to be a Service Provider, such Optionee may exercise
his or her Option within such period of time as is specified in the Option
Agreement (of at least 30 days) to the extent that the Option is vested on the
date of termination (but in no event later than the expiration of the term of
the Option as set forth in the Option Agreement). To the extent that the
Optionee is not entitled to exercise the Option on the date of such termination,
or if the Optionee does not exercise such Option to the extent so entitled
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the 1996 Plan.
If an Optionee ceases to be a Service Provider as a result of Optionee's
disability, the Optionee may within 12 months from the date of such termination
(but in no event later than the expiration date of the term of such Option as
set forth in the Option Agreement), exercise an Option to the extent otherwise
entitled to exercise it at the date of such termination. If such disability is
not a "disability" as such term is defined in Section 22(e)(3) of the Code, in
the case of an Incentive Stock Option such Incentive Stock Option shall
automatically cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option on the day three months
and one day following such termination. To the extent that the Optionee is
<PAGE>
not entitled to exercise the Option on the date of termination, or if the
Optionee does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the 1996 Plan.
If an Optionee dies while a Service Provider, the Option may be exercised
at any time within 12 months following the date of death (but in no event later
than the expiration of the term of such Option as set forth in the Notice of
Grant) to the extent vested on the date of death. If, at the time of death, the
Optionee is not vested as to the entire Option, the Shares covered by the
unvested portion of the Option shall revert to the 1996 Plan. The Option may be
exercised by the executor or administrator of the Optionee's estate or, if none,
by the person(s) entitled to exercise the Option under the Optionee's will or
the laws of descent or distribution. If the Option is not so exercised within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the 1996 Plan.
The Administrator determines how an optionee may pay the exercise price of
an option. The 1996 Plan specifically states that the following are acceptable
forms of consideration: (1) cash, (2) check, (3) promissory note, (4) certain
other shares of Common Stock (x) which in the case of Shares acquired upon
exercise of an Option, have been owned by the Optionee for more than six months
on the date of surrender, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which such
Option shall be exercised, (5) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the 1996
Plan, or (6) any combination of the foregoing methods of payment.
WHAT TERMS APPLY TO ALL OPTIONS?
Written Agreements. Options granted under the 1996 Plan are evidenced by a
------------------
written agreement between the Company and the employee, director or consultant
to whom the option is granted.
Rule 16b-3. Awards granted to persons subject to Section 16 Insiders are
----------
subject to any additional applicable restrictions of Rule 16b-3. See
"Additional Considerations Applicable to Section 16 Insiders."
Non-transferability of Options. Subject to the discretion of the
------------------------------
Administrator, options granted under the 1996 Plan are generally non-
transferable by the participant, other than by will or the laws of descent and
distribution, and may generally be exercised during the lifetime of the
participant only by him or her.
Adjustment on Changes in Capitalization. In the event any change, such as
---------------------------------------
a stock split or dividend, is made in the Company's capitalization which results
in an increase or decrease in the number of issued shares of Common Stock an
appropriate adjustment will be made in the price of each option and in the
number of shares subject to each option.
<PAGE>
Effect of Dissolution or Liquidation of the Company. In the event of a
---------------------------------------------------
proposed dissolution or liquidation of the Company, the Administrator shall
notify the Optionee at least 15 days prior to the proposed action. To the
extent it has not been previously exercised, the Option or Stock Purchase Right
shall terminate immediately prior to the consummation of such proposed
Effect of Acquisition of the Company. In the event of the merger of the
------------------------------------
Company with or into another corporation, or the sale of all or substantially
all of the Company's assets, each outstanding Option or Stock Purchase shall be
assumed or substituted for by the successor corporation (or a parent or
subsidiary or such successor corporation). If the successor corporation refuses
to assume or substitute for the outstanding Option or Stock Purchase, such
options will become vested and exercisable as to all shares subject to the
Option or Stock Purchase. To the extent that the Optionee is not entitled to
exercise the Option on the date of termination, or if the Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the option shall terminate and the shares covered by such Option shall revert to
the 1996 Plan.
Amendment and Termination. The Board may amend, alter, suspend or
-------------------------
discontinue the 1996 Plan at any time. No amendment, alteration, suspension or
discontinuation may adversely affect any outstanding option without the consent
of the holder. To the extent necessary and desirable to comply with Section 422
of the Code (or any other applicable law or regulation), the Company must obtain
shareholder approval of certain amendments to the 1996 Plan in the manner and to
the degree required by such laws and regulations.
ADDITIONAL CONSIDERATIONS FOR "AFFILIATES" OF THE COMPANY
Certain officers and directors of the Company are considered "affiliates" of
the Company, as that term is defined in Rule 144(a) under the Securities Act.
Affiliates may resell Common Stock subject to the restrictions of Rule 144 or
pursuant to an effective registration statement. Rule 144 requires that resales
by affiliates satisfy the following conditions: (1) the resale must be made
through a broker in an unsolicited "broker's transaction" or in a direct
transaction with a "market maker," as those terms are defined under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); (2) certain
information about the Company must be publicly available; (3) the amount of
Common Stock sold in any three-month period must not exceed the limits of Rule
144(e); and, if applicable, a Form 144 must be timely filed with the Securities
and Exchange Commission. If the resale is pursuant to a registration statement,
it may not be made in reliance on the registration statement on Form S-8 filed
in connection with the issuance of the shares described in this prospectus.
<PAGE>
TAX INFORMATION
The following is a brief summary of the effect of U.S. federal income tax
laws upon options granted under the 1996 Plan based on U.S. federal securities
and income tax laws in effect on January 1, 1997.
THIS SUMMARY IS NOT INTENDED TO BE EXHAUSTIVE AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE PROVISIONS OF ANY INCOME TAX LAWS
OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH AN OPTIONEE MAY RESIDE.
AN OPTIONEE SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE TAXATION OF
THESE OPTIONS.
Incentive Stock Options. No taxable income is recognized by the optionee
-----------------------
upon the grant or exercise of an ISO (unless the alternative minimum tax rules
apply). If Common Stock is issued to an optionee pursuant to the exercise of an
ISO, and if no disqualifying disposition of the shares is made by the optionee
within two years after the date of grant or within one year after the issuance
of such shares to the optionee, then (i) upon the resale of such shares, any
amount realized in excess of the option exercise price will be treated as a
long-term capital gain and any loss sustained will be treated as a long-term
capital loss, and (ii) no deduction will be allowed to the Company for federal
income tax purposes.
If Common Stock acquired upon the exercise of an ISO is disposed of before
the expiration of either holding period described above, generally (i) the
optionee will recognize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of the shares at exercise
(or, if less, the amount realized on the disposition of the shares) over the
option exercise price paid for such shares, and (ii) the Company is entitled to
a tax deduction in the same amount. Any further gain or loss realized by the
participant will be taxed as short-term or long-term capital gain or loss, as
the case may be, and will not result in any deduction by the Company.
If an option designated as an ISO first becomes exercisable in any calendar
year for shares whose aggregate fair market value exceeds $100,000, the exercise
of such excess shares will be treated for income tax purposes as having been
acquired by the optionee pursuant to an NSO. For purposes of this rule, (i) all
ISOs granted by the Company to an optionee are aggregated, (ii) the fair market
value of an option share is its value on the date of grant of the option, and
(iii) options are taken into account in the order in which they are granted.
Alternative Minimum Tax. The exercise of an ISO granted under the 1996
-----------------------
Plan may subject the optionee to the alternative minimum tax ("AMT") under
Section 55 of the Code. In computing alternative minimum taxable income, shares
purchased upon exercise of an ISO are treated as if they had been acquired by
the optionee pursuant to an NSO. See "Nonstatutory Stock Options," below.
Under certain circumstances, an optionee may affect the timing and measurement
of AMT by filing an election with the Internal Revenue Service under Section
83(b) within 30 days after the date of exercise of an ISO. Accordingly, an
optionee should consult his or her own tax advisor prior to exercising an ISO
concerning the advisability of filing an election under Section 83(b) of the
Code for
<PAGE>
alternative minimum tax purposes.
If an optionee pays AMT in excess of his or her regular tax liability,
the amount of such AMT relating to ISOs may be carried forward as a credit
against any subsequent years' regular tax in excess of the AMT.
Nonstatutory Stock Options. With respect to NSOs: (i) no income is
--------------------------
recognized by the optionee at the time the option is granted; (ii) generally, at
exercise, ordinary income is recognized by the optionee in an amount equal to
the difference between the option exercise price paid for the shares and the
fair market value of the shares on the date of exercise; and (iii) upon
disposition of the shares, any gain or loss is treated as capital gain or loss.
The Company is entitled to a tax deduction in the same amount of ordinary income
the optionee recognizes in connection with the exercise of an NSO. In the case
of an optionee who is also an employee at the time of grant, any income
recognized upon exercise of an NSO will constitute wages for which withholding
will be required.
ADDITIONAL CONSIDERATIONS APPLICABLE TO SECTION 16 INSIDERS
All Section 16 Insiders are advised to consult with the Company's general
counsel and with their own personal advisors regarding reporting and liability
under Section 16 with respect to their transactions under the 1996 Plan.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents and information heretofore filed by the Company
with the Securities and Exchange Commission are hereby incorporated by
reference:
(a) The Company's Registration Statement on Form S-1 (File No. 333-27241)
and exhibits thereto filed under the Securities Act of 1933, as
amended, in the form declared effective on July 31, 1997.
(b) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A12G (File No. 000-22575)
as filed with the Commission on July 25, 1997 filed pursuant to
Section 12 of the Securities Exchange Act of 1934.
(c) All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934
shall be deemed to be incorporated by reference in this registration
statement and to be part hereof from the date of filing such
documents.
<PAGE>
PROSPECTUS
CONCENTRIC NETWORK CORPORATION
---------------------
1997 STOCK PLAN
---------------------
This Prospectus relates to shares of common stock (the "Common Stock") of
Concentric Network Corporation (the "Company") offered to employees, directors
and consultants of the Company pursuant to options granted under the Company's
1997 Stock Plan (the "1997 Plan"). The terms and conditions of grants made
pursuant to the 1997 Plan, including the prices of the shares of Common Stock,
are governed by the provisions of the 1997 Plan and the agreements thereunder.
---------------------
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
SECURITIES THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
---------------------
The Company's executive offices are located at 10590 North Tantau Avenue,
Cupertino, California, 95014, and its telephone number at that location is (408)
342-2800.
The date of this Prospectus is Friday, August 8, 1997.
-----------------------------------------------------
<PAGE>
This Prospectus contains information concerning the Company and the 1997
Plan but does not contain all the information set forth in the Registration
Statement on Form S-8 for the 1997 Plan which the Company has filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Securities Act"). The Registration Statement, including the exhibits
thereto, may be inspected at the Commission's office in Washington, D.C. In
addition, the Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the Commission's Web site is
http:\\www.sec.gov.
The Company will undertake to provide without charge to each person to whom
a copy of this Prospectus is delivered, upon written or oral request of any such
person, (i) a copy of any and all of the information that has been or may be
incorporated by reference in this Prospectus, other than exhibits to such
documents, and (ii) a copy of any other documents required to be delivered to
optionees under the 1997 Plan pursuant to Rule 428(b) under the Securities Act,
including the Company's most recent Annual Report to Shareholders, proxy
statement and other communications distributed to its shareholders generally.
Requests for such copies and requests for additional information about the 1997
Plan and its Administrator should be directed to the Chief Financial Officer,
Concentric Network Corporation, 10590 North Tantau Avenue, Cupertino, CA 95014.
The company's telephone is (408) 342-2800.
Except for the person set forth in the foregoing paragraph, the Company has
not authorized any person to give any information or make any representations,
other than those contained in this Prospectus, in connection with the 1997 Plan.
If given or made, such information or representations must not be relied upon as
having been authorized by the Company. This Prospectus does not constitute an
offering in any state in which such offering may not lawfully be made.
-2-
<PAGE>
QUESTIONS AND ANSWERS ABOUT
CONCENTRIC NETWORK CORPORATION
1997 STOCK PLAN
WHAT IS THE 1997 STOCK PLAN?
The 1997 Plan was adopted and approved by the Board of Directors (the
"Board") in 1997 to enable employees, directors and consultants of the Company
or any parent or subsidiary to own stock in the Company and to take advantage of
the tax benefits allowed by the Internal Revenue Code to employer stock option
plans.
The 1997 Plan is not a qualified deferred compensation plan under 401(a) of
the Code nor is it subject to the provisions of the Employee Retirement Income
Security Act of 1974. The 1997 Plan will expire by its own terms in the year
2007, unless terminated sooner by the Board of the Company.
HOW MANY SHARES OF STOCK ARE RESERVED FOR ISSUANCE UNDER THE 1997 PLAN?
The Company has reserved a total 1,500,000 shares of Common Stock for
issuance under the 1997 Plan.
WHO ADMINISTERS THE 1997 PLAN?
The 1997 Plan is administered by a Committee or the Board ( the
"Administrator) appointed by the Board In the case of options intended to
qualify as "performance-based compensation" within the meaning of Section 162(m)
of the Code, the Committee shall consist of two or more "outside directors"
within the meaning of Section 162(m) of the Code. The Administrator has final
authority to interpret any provision of the 1997 Plan or any grant made under
the 1997 Plan.
WHO IS ELIGIBLE TO PARTICIPATE IN THE 1997 PLAN?
Employees, directors and consultants of the Company, or any parent or
subsidiary of the Company, are eligible to receive Nonstatutory Stock Options
("NSOs") and Stock Purchase Rights ("Rights").
<PAGE>
Only employees of the Company, or any parent or subsidiary of the Company,
are eligible to receive incentive stock options ("ISOs") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code").
WHO SELECTS THE EMPLOYEES, DIRECTORS AND CONSULTANTS WHO RECEIVE GRANTS?
The Administrator selects the employees, directors and consultants who
receive options under the 1997 Plan.
WHAT TYPES OF GRANTS ARE PERMITTED UNDER THE 1997 PLAN?
The 1997 Plan permits the Company to grant ISOs, NSOs, and Rights. These
grants are described below. The "Tax Information" section summarizes the tax
treatment of each of these grants.
WHAT IS A STOCK OPTION?
An option is a right to buy stock in the future at a predetermined price.
ISOs are options that qualify for preferred tax treatment under Section 422 of
the Internal Revenue Code of 1986, as amended ( the "Code"). NSOs are options
that do not qualify as ISOs.
Subject to the provisions of the 1997 Plan, the Administrator determines
the term of each option, the number of shares subject to each option, and the
time each option may be exercised. However, the term of an ISO may not exceed
ten years from the date of grant.
The Administrator also determines the option exercise price. However, the
exercise price of an ISO may not be less than the fair market value of the
Common Stock on the date of grant. Under certain circumstances, the exercise
price of an ISO may not be less than 110% of the fair market value on the date
of grant.
If an Optionee ceases to be a Service Provider, other than upon the
Optionee's death or Disability, the Optionee may exercise his or her Option
within such period of time as is specified in the Option Agreement to the extent
that the Option is vested on the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Option Agreement).
In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for three months following the Optionee's termination. If,
on the date of termination, the Optionee is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option shall revert to
the 1997 Plan. If, after termination, the Optionee does not exercise his or her
Option within
<PAGE>
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the 1997 Plan.
If an Optionee ceases to be a Service Provider as a result of the
Optionee's Disability, the Optionee may exercise his or her Option within such
period of time as is specified in the Option Agreement to the extent the Option
is vested on the date of termination (but in no event later than the expiration
of the term of such Option as set forth in the Option Agreement). In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve months following the Optionee's termination. If, on the
date of termination, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall revert to the
1997 Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the 1997 Plan.
If an Optionee dies while a Service Provider, the Option may be exercised
within such period of time as is specified in the Option Agreement (but in no
event later than the expiration of the term of such Option as set forth in the
Notice of Grant), by the Optionee's estate or by a person who acquires the right
to exercise the Option by bequest or inheritance, but only to the extent that
the Option is vested on the date of death. In the absence of a specified time
in the Option Agreement, the Option shall remain exercisable for twelve months
following the Optionee's termination. If, at the time of death, the Optionee is
not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall immediately revert to the 1997 Plan. The Option may
be exercised by the executor or administrator of the Optionee's estate or, if
none, by the person(s) entitled to exercise the Option under the Optionee's will
or the laws of descent or distribution. If the Option is not so exercised
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the 1997 Plan.
The Administrator determines how an optionee may pay the exercise price of
an option. The 1997 Plan specifically states that the following are acceptable
forms of consideration: (1) cash, (2) check, (3) promissory note, (4) other
shares that (A) in the case of Shares acquired upon exercise of an option, have
been owned by the Optionee for more than six months on the date of surrender,
and (B) have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised, (5)
consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the 1997 Plan, (6) a reduction in
the amount of any Company liability to the Optionee, including any liability
attributable to the Optionee's participation in any Company-sponsored deferred
compensation program or arrangement, (7) any combination of the foregoing
methods of payment, or (8) other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
WHAT TERMS APPLY TO ALL OPTIONS?
Written Agreements. Options granted under the 1997 Plan are evidenced by a
------------------
written agreement between the Company and the employee, director or consultant
to whom the option is
<PAGE>
granted.
Rule 16b-3. Awards granted to persons subject to Section 16 Insiders are
----------
subject to any additional applicable restrictions of Rule 16b-3. See
"Additional Considerations Applicable to Section 16 Insiders."
Non-transferability of Options. Options granted under the 1997 Plan are
------------------------------
generally non-transferable by the participant, other than by will or the laws of
descent and distribution, and may generally be exercised during the lifetime of
the participant only by him or her.
Adjustment and Changes in Capitalization. Subject to any required action by
----------------------------------------
the stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock that have been authorized for issuance under the 1997 Plan but as
to which no Options or Stock Purchase Rights have yet been granted or that have
been returned to the 1997 Plan upon cancellation or expiration of an Option or
Stock Purchase Right, as well as the price per share of Common Stock covered by
each such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
Effect of Dissolution or Liquidation of the Company. In the event of the
---------------------------------------------------
proposed dissolution or liquidation of the Company, the Administrator shall
notify each Optionee as soon as practicable prior to the effective date of such
proposed transaction. The Administrator in its discretion may provide for an
Optionee to have the right to exercise his or her Option until ten days prior to
such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option would not otherwise be exercisable. In addition,
the Administrator may provide that any Company repurchase option applicable to
any Shares purchased upon exercise of an Option or Stock Purchase Right shall
lapse as to all such Shares, provided the proposed dissolution or liquidation
takes place at the time and in the manner contemplated. To the extent it has
not been previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
Effect of Acquisition of the Company. In the event of a merger of the
------------------------------------
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Stock Purchase Right
shall be assumed or an equivalent option or right substituted by the
<PAGE>
successor corporation or a Parent or Subsidiary of the successor corporation. In
the event that the successor corporation refuses to assume or substitute for the
Option or Stock Purchase Right, the Optionee shall fully vest in and have the
right to exercise the Option or Stock Purchase Right as to all of the Optioned
Stock, including Shares as to which it would not otherwise be vested or
exercisable. If an Option or Stock Purchase Right becomes fully vested and
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Administrator shall notify the Optionee in writing or
electronically that the Option or Stock Purchase Right shall be fully vested and
exercisable for a period of fifteen days from the date of such notice, and the
Option or Stock Purchase Right shall terminate upon the expiration of such
period. For the purposes of this paragraph, the Option or Stock Purchase Right
shall be considered assumed if, following the merger or sale of assets, the
option or right confers the right to purchase or receive, for each Share of
Optioned Stock subject to the Option or Stock Purchase Right immediately prior
to the merger or sale of assets, the consideration (whether stock, cash, or
other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
Amendment and Termination. The Board may amend, alter, suspend or
-------------------------
discontinue the 1997 Plan at any time, but such amendment, alteration,
suspension or discontinuation may not adversely affect any outstanding option
without the consent of the holder. To the extent necessary and desirable to
comply with Section 422 of the Code (or any other applicable law or regulation),
the Company must obtain shareholder approval of certain amendments to the 1997
Plan in the manner and to the degree required by such laws and regulations.
ADDITIONAL CONSIDERATIONS FOR "AFFILIATES" OF THE COMPANY
Certain officers and directors of the Company are considered "affiliates" of
the Company, as that term is defined in Rule 144(a) under the Securities Act.
Affiliates may resell Common Stock subject to the restrictions of Rule 144 or
pursuant to an effective registration statement. Rule 144 requires that resales
by affiliates satisfy the following conditions: (1) the resale must be made
through a broker in an unsolicited "broker's transaction" or in a direct
transaction with a "market maker," as those terms are defined under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); (2) certain
information about the Company must be publicly available; (3) the amount of
Common Stock sold in any three-month period must not exceed the limits of Rule
144(e); and, if applicable, a Form 144 must be timely filed with the Securities
and Exchange Commission. If the resale is pursuant to a registration statement,
it may not be made in reliance on the registration statement on Form S-8 filed
in connection with the issuance of the shares described in this
<PAGE>
prospectus.
<PAGE>
TAX INFORMATION
The following is a brief summary of the effect of U.S. federal income tax
laws upon options granted under the 1997 Plan based on U.S. federal securities
and income tax laws in effect on January 1, 1997.
THIS SUMMARY IS NOT INTENDED TO BE EXHAUSTIVE AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE PROVISIONS OF ANY INCOME TAX LAWS
OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH AN OPTIONEE MAY RESIDE.
AN OPTIONEE SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE TAXATION OF
THESE OPTIONS.
Incentive Stock Options. No taxable income is recognized by the optionee
-----------------------
upon the grant or exercise of an ISO (unless the alternative minimum tax rules
apply). If Common Stock is issued to an optionee pursuant to the exercise of an
ISO, and if no disqualifying disposition of the shares is made by the optionee
within two years after the date of grant or within one year after the issuance
of such shares to the optionee, then (i) upon the resale of such shares, any
amount realized in excess of the option exercise price will be treated as a
long-term capital gain and any loss sustained will be treated as a long-term
capital loss, and (ii) no deduction will be allowed to the Company for federal
income tax purposes.
If Common Stock acquired upon the exercise of an ISO is disposed of before
the expiration of either holding period described above, generally (i) the
optionee will recognize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of the shares at exercise
(or, if less, the amount realized on the disposition of the shares) over the
option exercise price paid for such shares, and (ii) the Company is entitled to
a tax deduction in the same amount. Any further gain or loss realized by the
participant will be taxed as short-term or long-term capital gain or loss, as
the case may be, and will not result in any deduction by the Company.
If an option designated as an ISO first becomes exercisable in any calendar
year for shares whose aggregate fair market value exceeds $100,000, the exercise
of such excess shares will be treated for income tax purposes as having been
acquired by the optionee pursuant to an NSO. For purposes of this rule, (i) all
ISOs granted by the Company to an optionee are aggregated, (ii) the fair market
value of an option share is its value on the date of grant of the option, and
(iii) options are taken into account in the order in which they are granted.
Alternative Minimum Tax. The exercise of an ISO granted under the 1997
-----------------------
Plan may subject the optionee to the alternative minimum tax ("AMT") under
Section 55 of the Code. In computing alternative minimum taxable income, shares
purchased upon exercise of an ISO are treated as if they had been acquired by
the optionee pursuant to an NSO. See "Nonstatutory Stock Options," below.
Under certain circumstances, an optionee may affect the timing and measurement
of AMT by filing an election with the Internal Revenue Service under Section
83(b) within 30 days after the date of exercise of an ISO. Accordingly, an
optionee should consult his or her own tax advisor prior to exercising an ISO
concerning the advisability of filing an election under Section 83(b) of the
Code for
<PAGE>
alternative minimum tax purposes.
If an optionee pays AMT in excess of his or her regular tax liability,
the amount of such AMT relating to ISOs may be carried forward as a credit
against any subsequent years' regular tax in excess of the AMT.
Nonstatutory Stock Options. With respect to NSOs: (i) no income is
--------------------------
recognized by the optionee at the time the option is granted; (ii) generally, at
exercise, ordinary income is recognized by the optionee in an amount equal to
the difference between the option exercise price paid for the shares and the
fair market value of the shares on the date of exercise; and (iii) upon
disposition of the shares, any gain or loss is treated as capital gain or loss.
The Company is entitled to a tax deduction in the same amount of ordinary income
the optionee recognizes in connection with the exercise of an NSO. In the case
of an optionee who is also an employee at the time of grant, any income
recognized upon exercise of an NSO will constitute wages for which withholding
will be required.
ADDITIONAL CONSIDERATIONS APPLICABLE TO SECTION 16 INSIDERS
All Section 16 Insiders are advised to consult with the Company's general
counsel and with their own personal advisors regarding reporting and liability
under Section 16 with respect to their transactions under the 1997 Plan.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents and information heretofore filed by the Company
with the Securities and Exchange Commission are hereby incorporated by
reference:
(a) The Company's Registration Statement on Form S-1 (File No. 333-27241)
and exhibits thereto filed under the Securities Act of 1933, as
amended, in the form declared effective on July 31, 1997.
(b) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A12G (File No. 000-22575)
as filed with the Commission on July 25, 1997 filed pursuant to
Section 12 of the Securities Exchange Act of 1934.
(c) All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934
shall be deemed to be incorporated by reference in this registration
statement and to be part hereof from the date of filing such
documents.
<PAGE>
PROSPECTUS
CONCENTRIC NETWORK CORPORATION
----------------
1997 EMPLOYEE STOCK PURCHASE PLAN
----------------
This Prospectus relates to shares of common stock (the "Common Stock") of
Concentric Network Corporation (the "Company") offered to employees, directors
and consultants of the Company pursuant to options granted under the Company's
1997 Employee Stock Purchase Plan (the "Purchase Plan"). The terms and
conditions of grants made pursuant to the Purchase Plan, including the prices of
the shares of Common Stock, are governed by the provisions of the Purchase Plan
and the agreements thereunder.
----------------
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
SECURITIES THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
----------------
The Company's executive offices are located at 10590 North Tantau Avenue,
Cupertino, California, 95014, and its telephone number at that location is (408)
342-2800.
The date of this Prospectus is Friday, August 8, 1997
-----------------------------------------------------
<PAGE>
This Prospectus contains information concerning the Company and the
Purchase Plan but does not contain all the information set forth in the
Registration Statement on Form S-8 for the Purchase Plan which the Company has
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "Securities Act"). The Registration Statement, including
the exhibits thereto, may be inspected at the Commission's office in Washington,
D.C. In addition, the Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of the Commission's
Web site is http:\\www.sec.gov.
The Company will undertake to provide without charge to each person to whom
a copy of this Prospectus is delivered, upon written or oral request of any such
person, (i) a copy of any and all of the information that has been or may be
incorporated by reference in this Prospectus, other than exhibits to such
documents, and (ii) a copy of any other documents required to be delivered to
optionees under the Purchase Plan pursuant to Rule 428(b) under the Securities
Act, including the Company's most recent Annual Report to Shareholders, proxy
statement and other communications distributed to its shareholders generally.
Requests for such copies and requests for additional information about the
Purchase Plan and its Administrator should be directed to the Chief Financial
Officer, Concentric Network Corporation, 10590 North Tantau Avenue, Cupertino,
CA 95014. The Company's telephone number is (408) 342-2800.
Except for the person set forth in the foregoing paragraph, the Company has
not authorized any person to give any information or make any representations,
other than those contained in this Prospectus, in connection with the Purchase
Plan. If given or made, such information or representations must not be relied
upon as having been authorized by the Company. This Prospectus does not
constitute an offering in any state in which such offering may not lawfully be
made.
<PAGE>
QUESTIONS AND ANSWERS ABOUT
CONCENTRIC NETWORK CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
WHAT IS THE 1997 EMPLOYEE STOCK PURCHASE PLAN?
The Concentric Network Corporation 1997 Employee Stock Purchase Plan
provides you with the opportunity to acquire shares of Common Stock from the
Company at a discounted price through payroll deductions.
The Purchase Plan allows you to:
. Invest up to 10% of your compensation through payroll deductions.
. Purchase Concentric Network Corporation Common Stock at a
discount of at least 15%.
The Purchase Plan is not a qualified deferred compensation plan under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and is not subject to the provisions of the Employee Retirement Income Security
Act of 1974. The Purchase Plan will continue in effect until 2006, unless
terminated sooner by the Board of Directors. A total of 500,000 shares is
presently reserved for issuance under the Purchase Plan. The shares may be
authorized but unissued or reacquired Common Stock.
HOW DOES THE PURCHASE PLAN WORK?
The Purchase Plan has consecutive, overlapping, two-year offering periods.
Each offering period includes four six-month purchase periods. The offering
periods generally start with the first trading day on or after February 15 and
August 15 of each year. An eligible employee of the Company participating in
the Purchase Plan is granted a right pursuant to the Purchase Plan, and may
authorize payroll deductions of up to 10% of his or her "compensation," as
defined below. The amounts deducted are accumulated and, at the end of each
purchase period, applied to purchase shares of Common Stock. The purchase price
will be 15% less than the fair market value on either the first day of the
offering period or the last day of the purchase period, whichever is lower.
<PAGE>
When the fair market value at the end of a purchase period is less than the
fair market value at the beginning of the offering period, the participants will
be withdrawn from the current offering period following exercise and
automatically re-enrolled in a new offering period after purchase. The new
offering period will use the lower fair market value as of the first date of the
new offering period to determine the purchase price for future purchase periods.
The Purchase Plan includes provisions for changes in payroll deductions,
withdrawal from participation and the effect of termination of employment.
WHO IS ELIGIBLE?
You are eligible to participate in the Purchase Plan if, at the beginning
of an offering period, you are a regular employee of the Company scheduled to
work at least twenty hours per week and more than five months in any calendar
year.
However, you may not participate in the Purchase Plan if immediately after
the first day of an offering period (an "offering date"), you own five percent
(5%) or more of the outstanding stock of the Company. In addition, your right
to buy the Company's Common Stock under the Purchase Plan may not accrue at a
rate exceeding $25,000 of the fair market value of such shares (determined on
the first day of the offering period) per calendar year.
HOW DO I ENROLL?
You may enroll in the Purchase Plan by completing a subscription agreement
and submitting it to the Company's payroll office prior to the applicable
enrollment date. Your subscription agreement will remain in effect for
successive offering periods until it is revised or revoked by you.
IF I DECIDE NOT TO ENROLL RIGHT NOW, WILL I HAVE ANOTHER OPPORTUNITY?
Yes. You may enroll before any subsequent offering period during which the
Purchase Plan is in effect. However, you may not enroll in an offering period
after the enrollment date has passed.
HOW MUCH MAY I CONTRIBUTE?
You may contribute through payroll deduction up to 10% of your
"compensation." For this purpose, compensation means your cash pay, including
salary, wages, commission and bonuses, but does not include any imputed income
or income arising from the exercise or disposition of equity compensation.
<PAGE>
Once you have authorized the contributions, they will be deducted from your
paycheck each pay period and held in an account in your name until the
completion of the purchase period.
MAY I MAKE A CASH CONTRIBUTION TO THE PURCHASE PLAN IN ADDITION TO MY PAYROLL
DEDUCTION?
No.
DO I AUTOMATICALLY OWN A SHARE OF THE COMPANY'S COMMON STOCK AS SOON AS ITS COST
HAS BEEN DEDUCTED FROM MY COMPENSATION?
No. The stock is actually bought only twice a year, on the last trading
day of each purchase period. You must be employed by the Company on the last
trading day of each purchase period for the stock to be purchased for you.
WHAT PRICE WILL I PAY?
The purchase price will be 85% of the fair market value on the first day of
the offering period or last trading day of the purchase period, whichever is
------------
lower.
- -----
The fair market value is determined by the Board of Directors as provided
in the Purchase Plan, but generally is the closing sale price of the Common
Stock on the applicable date.
HOW MANY SHARES CAN I BUY?
The maximum number of shares you may purchase during a single purchase
period is 25,000 shares. If your contributions exceed the amount necessary to
purchase this maximum number of shares, these excess contributions will be
returned to you promptly after the end of the applicable purchase period.
Within this limit, the number of shares purchased depends on the fair
market value of the Company's Common Stock on the first day of the offering
period and last trading day of the purchase period and the total amount of your
contributions by the end of the purchase period. On the last day of the
purchase period, your accumulated contributions will be used to purchase whole
shares at the purchase price.
You can not buy a fraction of a share. Any cash remaining to buy less than
a whole share will automatically be rolled over into the next purchase period.
Example: If the market price on the applicable date is $10.00, then 85% of
that price is $8.50. If your payroll deductions for the purchase period amount
to $300.00, you would be able to purchase 35 shares (300 divided by 8.50). The
balance of $2.50 would be held in your account for the next
<PAGE>
purchase period.
There is also a limit on the number of shares available under the Purchase
Plan. If this limit is reached, the available shares will be allocated on a pro
rata basis.
MAY I BEGIN PARTICIPATING IN THE MIDDLE OF AN OFFERING PERIOD?
No. To participate in an offering period, you must enroll prior to the
first day of that offering period.
MAY I INCREASE OR DECREASE MY PAYROLL DEDUCTIONS DURING AN OFFERING PERIOD?
Yes. You may increase or decrease your rate of payroll deductions during
an offering period by submitting a new subscription agreement. However, the
number of times you change your participation rate may be limited by the
Company.
MAY I WITHDRAW FROM THE PURCHASE PLAN AT ANY TIME?
Yes. If you find it necessary to withdraw from the Purchase Plan, simply
complete the 1997 Employee Stock Purchase Plan Notice of Withdrawal Form and
send it to Peter Bergeron prior to the last day of a purchase period. Your
payroll deductions will stop, and you will be issued a check for the balance in
your account within a reasonable time period. If you do withdraw from the
Purchase Plan, you cannot rejoin until the next offering period.
WHAT HAPPENS TO THE SHARES PURCHASED?
As promptly as practicable after the close of each purchase period, the
shares you purchased will be delivered to a brokerage account designated by the
Company and kept in such account pursuant to a participation agreement between
you and the Company or the broker and subject to the conditions described
therein, which may include a requirement that shares be held and not sold for
certain time periods, or the Company may establish some other means for you to
receive ownership of your shares.
WHAT RECORDS WILL I RECEIVE REGARDING MY ACCOUNT?
You will receive a statement of your account at least once a year. The
statement will summarize your total contribution, per share purchase price, the
number of shares purchased and any remaining cash balance.
<PAGE>
DO I RECEIVE INTEREST ON MY PAYROLL DEDUCTIONS?
No.
WHAT HAPPENS IF I GO ON A LEAVE OF ABSENCE OR ON LONG-TERM DISABILITY?
If at any time you cease to be actively employed by the Company or a
designated subsidiary for a period of more than 90 days, then unless your re-
employment is guaranteed by contract or statute, you will be withdrawn from the
Purchase Plan and the payroll deductions accumulated in your account will be
returned to you unless your right to employment is guaranteed by contract or
statute. You may rejoin the Purchase Plan upon your return to eligible status
by filing a new subscription agreement through the normal enrollment process.
HOW IS THE PURCHASE PLAN ADMINISTERED?
The Purchase Plan is administered, at the Company's expense, by the Board
of Directors of the Company or a committee appointed by the Board of Directors.
All questions of interpretation or application of the Purchase Plan are
determined by the Board of Directors or its committee, whose decisions are final
and binding upon all participants.
Members of the Board of Directors are elected by the shareholders for terms
of approximately one year and may be removed from office upon a sufficient vote
of shareholders. Members of the Board of Directors or committee receive no
additional compensation for administering the plans.
HOW DOES THE COMPANY USE THE FUNDS FROM THE PURCHASE PLAN?
All funds held by the Company under the Purchase Plan may be used by the
Company for any corporate purpose. Funds received by the Company for the
purchase of shares under the Purchase Plan will be added to the Company's
general funds and used for working capital purposes.
WHAT HAPPENS IF THERE IS A STOCK SPLIT, STOCK DIVIDEND, OR OTHER CHANGE
AFFECTING THE COMPANY'S COMMON STOCK?
The number of shares reserved under the Purchase Plan will be increased
proportionately in the event of a stock split or stock dividend. In the event
of any other change affecting the Company's Common Stock, the Board of Directors
of the Company will make the necessary adjustments.
<PAGE>
WHAT HAPPENS IF THE COMPANY IS DISSOLVED OR LIQUIDATED?
The current offering periods will be shortened and a new exercise date will
be set, unless provided otherwise by the Board of Directors.
WHAT HAPPENS IF THE COMPANY IS ACQUIRED OR SOLD?
Unless the merger or reorganization agreement provides otherwise, the
current offering periods will be shortened and a new exercise date, prior to the
consummation of the transaction, will be set.
CAN THE PURCHASE PLAN BE AMENDED?
Yes, the Board of Directors of the Company may amend the Purchase Plan,
except that certain amendments require shareholder approval.
CAN MY RIGHTS TO PURCHASE STOCK WITH PAYROLL DEDUCTIONS BE ASSIGNED TO ANYONE
ELSE?
No.
WHAT RESTRICTIONS MIGHT APPLY TO THE RESALE OF THE SHARES I ACQUIRE?
Certain officers and directors of the Company may be deemed to be
"affiliates" of the Company as that term is defined Rule 144(a) of the
Securities Act. Common Stock acquired under the Purchase Plan by an affiliate
may only be reoffered or resold pursuant to an effective registration statement
or pursuant to the volume limitations of Rule 144 or another exemption from the
registration requirements of the Securities Act. Such reoffers or resales may
not be made in reliance on the Registration Statement filed in connection with
the shares of Common Stock issued as described in this Purchase Plan summary.
<PAGE>
EMPLOYEE STOCK PURCHASE PLAN TAX IMPLICATIONS
The discussion below summarizes the federal income tax consequences of the
grant and exercise of a stock option under an employee stock purchase plan, as
defined in Section 423 of the Code. It also summarizes the tax consequences of
the subsequent sale or other disposition of shares acquired under such options.
This summary is not intended to be exhaustive and may not cover all tax aspects
of every situation.
First Day of the Offering Period
- --------------------------------
You are not taxed when you are granted a right at the beginning of the
offering period.
Date of Purchase of Stock
- -------------------------
You are not taxed when shares are purchased for you at the end of the
purchase period, even though your purchase price will be the lower of 85% of the
fair market value on the first day of the offering period or last day of the
purchase period.
Date of Sale of Shares
- -----------------------
If you sell your shares two years or more after the beginning of the
----
offering period and one year or more after the date of purchase (the "Statutory
Holding Periods"):
I. At the time you sell the shares, any gain up to 15% of the market
value of the shares at the beginning of the offering period is
taxable as ordinary income, and any further gain is taxable as
long-term capital gain.
2. Any loss is treated as long-term capital loss, and there will be
no ordinary income.
If you sell your shares before the end of the Statutory Holding Periods:
II. At the time you sell the shares, the difference between your
purchase price and the fair market value of the shares on the
date of purchase is taxable as ordinary income.
III. The difference between the amount you receive on the sale of the
shares and the fair market value of the shares on the date of
purchase is taxable as capital gain or loss.
<PAGE>
Tax Deduction by Company
- ------------------------
If you sell your shares before the end of the Statutory Holding Periods,
the Company is entitled to a tax deduction corresponding to the ordinary income
you recognize under the rules discussed above. For this reason, when you sell
any shares you purchase under the Purchase Plan, you must notify the Company in
writing within 30 days of the sale. At any time, the Company may, but will not
be obligated to, withhold from your compensation the amount necessary for the
Company to meet applicable withholding obligations.
Disposition Other than Sale
- ---------------------------
If you give away or otherwise dispose of your shares before the end of the
Statutory Holding Periods, the difference between your purchase price for the
shares and their fair market value on the date of purchase is taxable to you as
---
ordinary income. If you give away or otherwise dispose of the shares after the
Statutory Holding Periods have elapsed, an amount equal up to 15% of the market
value of the shares at the beginning of the offering period is taxable to you as
ordinary income.
Tax Consultation
- ----------------
SINCE TAX IMPLICATIONS OF THE PURCHASE PLAN CAN BE COMPLEX, WE SUGGEST THAT
YOU CONTACT YOUR TAX ADVISOR WITH QUESTIONS SPECIFIC TO YOUR SITUATION.
<PAGE>
ADDITIONAL CONSIDERATIONS APPLICABLE TO SECTION 16 INSIDERS
All Section 16 Insiders are advised to consult with the Company's general
counsel and with their own personal advisors regarding reporting and liability
under Section 16 with respect to their transactions under the Purchase Plan.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents and information heretofore filed by the Company
with the Securities and Exchange Commission are hereby incorporated by
reference:
(a) The Company's Registration Statement on Form S-1 (File No. 333-27241)
and exhibits thereto filed under the Securities Act of 1933, as
amended, in the form declared effective on July 31, 1997.
(b) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A12G (File No. 000-22575)
as filed with the Commission on July 25, 1997 filed pursuant to
Section 12 of the Securities Exchange Act of 1934.
(c) All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934
shall be deemed to be incorporated by reference in this registration
statement and to be part hereof from the date of filing such
documents.
<PAGE>
CONCENTRIC NETWORK CORPORATION.
REGISTRATION STATEMENT ON FORM S-8
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
---------------------------------------
There are hereby incorporated by reference into this Registration Statement
the following documents and information heretofore filed by Concentric Network
Corporation (the "Company") with the Securities and Exchange Commission (the
"Commission"):
1. The Company's Registration Statement on Form S-1 (File No. 333-27241)
and exhibits thereto filed under the Securities Act of 1933, as amended,
in the form declared effective on July 31, 1997.
2. The description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A12G (File No. 000-22575) as filed with
the Commission on July 25, 1997 filed pursuant to Section 12 of the
Securities Exchange Act of 1934.
3. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Securities Exchange Act of 1934 after the date hereof,
and prior to the filing of a post-effective amendment which indicates that
all securities offered have been sold or which deregisters all securities
then remaining unsold, shall be deemed to be incorporated by reference
herein and to be part hereof from the date of filing of such documents.
Item 4. Description of Securities.
-------------------------
Not applicable.
Item 5. Interests of Named Experts and Counsel.
--------------------------------------
Not applicable.
Item 6. Indemnification of Directors and Officers.
-----------------------------------------
See Item 14 Part II of the Company's Final Prospectus as filed on the
Registration Statement on Form S-1 (File No. 333-27241), in the form declared
effective on July 31, 1997.
Item 7. Exemption from Registration Claimed.
-----------------------------------
Not applicable.
II-1
<PAGE>
Item 8. Exhibits.
--------
Exhibit Description
Number
4.1 Incentive Stock Option Plan.
4.2* 1995 Stock Incentive Plan for Employees and Consultants.
4.3 Form of Option Agreement.
4.4* Amended and Restated 1996 Stock Plan.
4.5** 1997 Stock Plan.
4.6** 1997 Employee Stock Purchase Plan.
5.1 Opinion of Counsel as to legality of securities being registered.
23.1 Consent of Ernst & Young, L.L.P., Independent Auditors.
23.2 Consent of Counsel (contained in Exhibit 5.1).
24.1 Power of Attorney (see page II-4).
- ---------------------------
* Incorporated by reference to exhibits filed with the Company's Registration
Statement on Form S-1 (File No. 333-27241), as filed on May 16, 1997.
** Incorporated by reference to exhibits filed with the Company's Amendment No.
2 to Registration Statement on Form S-1 (File No. 333-27241), as filed on
June 23, 1997.
Item 9. Undertakings.
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any material
information with respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial
II-2
<PAGE>
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, as amended, each filing of the Company's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act of 1934, as amended, that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the Company pursuant to the items described in Item 6 of
Part II of this Registration Statement, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933, as amended, and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933, as amended, and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, Concentric Network Corporation, certifies that it has reasonable
grounds to believe that it meets all of the requirements for filing on Form S-8
and has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Cupertino, State of
California, on the 8th day of August 1997.
CONCENTRIC NETWORK CORPORATION
By: /s/HENRY R. NOTHHAFT
-----------------------------
Henry R. Nothhaft
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Henry R. Nothhaft and Michael F.
Anthofer and each of them, acting individually, as his attorney-in-fact, with
full power of substitution, for him and in any and all capacities, to sign any
and all amendments to this Registration Statement (including post-effective
amendments) on Form S-8, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as they may be signed
by our said attorney to any and all amendments to the Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, as amended this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------------------------- ------------------------------------- -----------------
<S> <C> <C>
/s/ HENRY R. NOTHHAFT President and Chief Executive Officer August 8, 1997
- --------------------------- (Principal Executive Officer), Director
Henry R. Nothhaft
/s/ MICHAEL F. ANTHOFER Chief Financial Officer (Principal August 8, 1997
- --------------------------- Financial and Accounting Officer)
Michael F. Anthofer
/s/ TERENCE M. O'TOOLE Director August 8, 1997
- ---------------------------
Terence M. O'Toole
/s/ VINOD KHOSLA Director August 8, 1997
- ---------------------------
Vinod Khosla
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Director
- ---------------------------
Franco Regis
Director
- ---------------------------
Louis P. Bender III
/s/ GARY E. RIESCHEL Director August 8, 1997
- ---------------------------
Gary E. Rieschel
/s/ ROBERT W. DOEDE Director August 8, 1997
- ---------------------------
Robert W. Doede
</TABLE>
II-5
<PAGE>
CONCENTRIC NETWORK CORPORATION
REGISTRATION STATEMENT ON FORM S-8
INDEX TO EXHIBITS
-----------------
Exhibit Description
Number
4.1 Incentive Stock Option Plan.
4.2* 1995 Stock Incentive Plan for Employees and Consultants.
4.3 Form of Option Agreement.
4.4* Amended and Restated 1996 Stock Plan.
4.5** 1997 Stock Plan.
4.6** 1997 Employee Stock Purchase Plan.
5.1 Opinion of Counsel as to legality of securities being registered.
23.1 Consent of Ernst & Young, L.L.P., Independent Auditors.
23.2 Consent of Counsel (contained in Exhibit 5.1).
24.1 Power of Attorney (see page II-4).
- -----------------------------
* Incorporated by reference to exhibits filed with the Company's Registration
Statement on Form S-1 (File No. 333- 27241), as filed on May 16, 1997.
** Incorporated by reference to exhibits filed with the Company's Amendment No.
2 to Registration Statement on Form S-1 (File No. 333-27241), as filed on
June 23, 1997.
<PAGE>
EXHIBIT 4.1
CONCENTRIC RESEARCH CORPORATION
INCENTIVE STOCK OPTION PLAN
---------------------------
Article 1. Purpose.
--------------------
The purpose of this Incentive Stock Option Plan (the "Plan") is to
encourage stock ownership by certain employees of CONCENTRIC RESEARCH
CORPORATION, a Florida corporation (the "Corporation"), so that they may acquire
a proprietary interest in the success of the Corporation. The Plan is intended
to provide an incentive for maximum effort in the successful operation of the
Corporation and to encourage certain employees of the Corporation to remain in
the employ of the Corporation. It is further intended that the options granted
pursuant to the Plan shall constitute "Incentive Stock Options" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
Article II. Administration.
----------------------------
The Plan shall be administrated by a Stock Option Committee (the
"Committee") which shall consist of three members of the Board of Directors of
Corporation (the "Board of Directors") who are appointed to the Committee from
time to time by the Board of Directors. A majority of the Committee shall
constitute a quorum and acts of a majority of the members present at any meeting
at which a quorum is present, or acts approved in writing by all members of the
Committee, shall be deemed to be valid acts of the Committee. No member of the
Committee shall be eligible to receive an option under the Plan.
The Committee shall select one of its members to serve as Chairman, shall
appoint one of its members as Secretary, who shall maintain a record of its
actions and decisions, and shall hold meetings from time to time as it may
determine. The Committee shall have authority to:
(a) Determine which of the eligible employees of the Corporation
(determined under Article III hereof) shall be granted options,
when such options shall be granted and the number of shares and
terms with respect to each such option;
(b) Prescribe rules and regulations for administering the Plan; and
(c) Decide any questions arising as to the interpretation or
application of any provision under this Plan.
-1-
<PAGE>
The determination of the Committee as to any of these matters shall be final
and binding upon all persons whomsoever and shall be reported to the Board of
Directors at its next ensuing meeting.
Article III. Eligibility.
--------------------------
The persons who shall be eligible to receive options pursuant to this
Plan shall be such of the employees of the Corporation as the Committee shall
select from time to time. A grantee of an option under this Plan (an
"Optionee") may hold more than one option hereunder, but only on the terms and
conditions hereinafter set forth. Notwithstanding any of the other provisions
of this Plan, options may be granted hereunder to an individual who then owns
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of Corporation, or of a parent or a subsidiary
corporation (as those terms are defined in Section 425 of the Code) of
Corporation (such ownership to be determined by application of the applicable
attribution rules under the Code) only with the following special conditions:
(i) the option price shall be equal to one hundred ten percent (110%) of the
option price otherwise determined in accordance with subparagraph (b) of Article
V following and (ii) the option shall not be exercisable after the expiration of
five years after the date of grant of such option.
Article IV. Stock to be Issued Under This Plan.
------------------------------------------------
The stock to be issued upon the exercise of options granted under this
Plan shall be shares of the Common Stock of Corporation ("Common Stock") which
may either be authorized and unissued shares or issued shares held or hereafter
acquired for the treasury of Corporation. The aggregate number of shares of
Common Stock which may be issued under options granted hereunder shall not
exceed Ten Million (10,000,000) shares. In the event that any
----------- ------------
outstanding option under this Plan expires or is terminated, the shares of
Common Stock allocable to the unexercised portion of such option may again be
subject to an option under the Plan.
Corporation shall not be required to issue or deliver any certificate
for shares of its Common Stock purchased upon the exercise of all or any part of
an option before (a) the admission of such shares to listing on any stock
exchange on which such stock may then be listed, or, if applicable, approved for
inclusion on the National Market System of the NASD and (b) completion of any
registration or other qualification of such shares under any state or federal
law or ruling or regulation of any governmental regulatory body that Corporation
shall, in its sole discretion, determine is necessary or advisable.
Article V. Terms and Conditions of Options.
--------------------------------------------
Each option granted under this Plan shall be evidenced by an agreement
in writing which shall be subject to such amendment and
-2-
<PAGE>
modification from time to time as the Committee shall deem necessary to comply
with applicable law or regulation, and which shall contain, in such form and
with such other provisions as the Committee shall from time to time determine,
provisions which comply with the following terms and conditions:
(a) The Number of Shares. Each option shall state the number of
--------------------
shares of Common Stock to which it pertains.
(b) Option Price. Each option shall state the option price per
------------
share of Common Stock on the date of the granting of the
option. The Committee shall have full authority to
determine the fair market value of a share of Common Stock.
If the Common Stock is traded in the over-the-counter
market, such fair market value shall be deemed to be the
arithmetical mean between the asked and the bid prices
between the opening of the market and noon on such date as
reported by NASDAQ. If the Common Stock is traded on an
exchange, such fair market value shall be deemed to be the
arithmetical mean of the high and low prices at which it is
quoted or traded between the opening of the market and noon
on such day on the exchange on which it generally has the
greatest trading volume.
(c) Medium and Time of Payment. The option price shall be
--------------------------
payable in United States dollars upon the exercise of the
option, and the exercise of any option and the delivery of
the optioned shares shall be contingent upon receipt by
Corporation of the full purchase price in cash or by check.
(d) Term and Exercise of Options. Each option shall state the
----------------------------
period of time during which the option may be exercised;
provided, however, that, notwithstanding anything contained
herein indicating a longer period, no option granted
hereunder shall be exercisable after the expiration of ten
years after the date of grant of such option. Any option
may be exercised, in whole or in part, from time to time, as
to one or more whole shares of Common Stock covered by the
option, but not as to less than five hundred (500) shares at
any one time (unless the number purchased is the total
number at that time purchasable under the option) or with
respect to a fraction of a share.
(e) Period of Exercise of Options. Except as otherwise
-----------------------------
specifically provided herein:
-3-
<PAGE>
(1) no option granted hereunder shall be exercisable until
the first anniversary of the grant thereof;
(2) an Optionee may exercise a portion of an option from
the date that portion first becomes exercisable until
the option expires or is otherwise terminated; and
(3) in the case of any fractional share resulting from any
calculation under the Plan, the shares available for
exercise shall be determined to the nearest lower
number of whole shares.
(f) Maximum Value of Stock with Respect to Which Options Are
--------------------------------------------------------
Exercisable for First Time in Any Calendar Year. In the
-----------------------------------------------
event the aggregate fair market value (determined at the
time the option is granted) of stock with respect to which
options are exercisable hereunder for the first time by any
eligible employee during any one calendar year (under this
Plan and all other incentive stock option plans of
Corporation or any parent or subsidiary corporation of
Corporation) shall exceed One Hundred Thousand Dollars
($100,000), such options shall be treated as options which
are not incentive stock options, taking options into account
in the order in which they were granted. In the case of an
option that is to be treated in part as an incentive stock
option and in part as a nonincentive stock option,
Corporation may designate the shares of Common Stock that
are to be treated as stock acquired pursuant to exercise of
an incentive stock option by issuing a separate certificate
for such shares and identifying the certificate as incentive
stock option shares in the stock transfer records of
Corporation.
(g) Transfer of Option. Neither the whole nor any part of any
------------------
option shall be transferable by an Optionee or by operation
of law during said Optionee's lifetime and at such
Optionee's death an option or any part thereof shall only be
transferable by such Optionee's will or by the laws of
descent and distribution. An option may be exercised during
the lifetime of the Optionee only by the Optionee. Any
option, and any and all rights granted to an Optionee
thereunder, to the extent not theretofore effectively
exercised shall
-4-
<PAGE>
automatically terminate and expire upon any sale, transfer or
hypothecation or any attempted sale, transfer or hypothecation of such
option or rights, or upon the bankruptcy or insolvency of the
Optionee.
(h) Termination of Employment. No option may be exercised after the
--------------------------
termination of the employment of the Optionee with the Corporation
except as hereinafter provided, specifically subject, however, to the
provisions of paragraph (d) of the this Article V:
(1) Disability. Options granted under the Plan may be exercised
within three (3) months after the termination of the employment
of the Optionee by reason of the Disability (as hereinafter
defined) of the Optionee. For purposes of this Plan, an Optionee
shall be deemed to have incurred a "Disability" if a
disinterested duly licensed medical doctor appointed by the
Corporation determines that the Optionee is totally and
permanently prevented, as a result of physical or mental
infirmity, injury, or disease, either occupational or
nonocccupational in cause, from holding the job or position with
the Corporation or engaging in the employment activity, or a
comparable job or employment activity with the Corporation, which
the Optionee held or customarily engaged in prior to the
occurrence of the disability (provided, however, that disability
hereunder shall not include any disability incurred or resulting
from the Optionee's having engaged in a criminal act or
enterprise, or any disability consisting of or resulting from the
Optionee's chronic alcoholism, addiction to narcotics or an
intentionally self-inflicted injury).
(2) Death.
------
(i) If an Optionee shall die while employed by the Corporation,
the options granted under this Plan to such deceased
Optionee shall be exercisable within one (1) year after the
date of the Optionee's death.
-5-
<PAGE>
(ii) The legal representative, if any, of the deceased
Optionee's estate, otherwise the appropriate legatees
or distributees of the deceased Optionee's estate, may
exercise the option on behalf of such a deceased
Optionee.
(i) Acceleration. The Committee may, in the case of merger,
------------
consolidation, dissolution or liquidation of Corporation,
accelerate the expiration date of any option for any or all
of the shares covered thereby (but still giving Optionees a
reasonable period of time to exercise any outstanding
options prior to the accelerated expiration date) and may,
in the case of merger, consolidation, dissolution or
liquidation of Corporation, or in any other case in which it
feels it is in the Corporation's best interest, accelerate
the date or dates on which any option or any part of any
option shall be exercisable for any or all of the shares
covered thereby.
(j) Rights as a Stockholder. An Optionee shall have no rights as
-----------------------
a stockholder with respect to any shares covered by any of
said Optionee's options until the date that Corporation
receives payment in full for the purchase of said shares
pursuant to the effective exercise of said option. No
adjustment shall be made for dividends or distributions or
other rights for which the record date is prior to the date
such payment is received by Corporation, except as provided
in Article VII hereof.
(k) Other Provisions. The option agreements authorized under the
----------------
Plan shall contain such other provisions, including, without
limitation, restrictions upon the exercise of the option, as
the Committee shall deem advisable and, in any event, all
such option agreements shall contain such limitations and
restrictions upon the exercise of the option as shall be
necessary in order that such option will be an "incentive
stock option" as defined in Section 422 of the Code or to
conform to any change in the law.
Article VI. Notice of Intent to Exercise Options.
-------------------------------------------------
An Optionee desiring to exercise an option granted hereunder as to one
or more of the shares covered thereby must, in order to so exercise the option,
notify the Corporation in writing to that effect, specifying the number of
shares to be purchased in a form satisfactory to the Committee.
-6-
<PAGE>
ARTICLE VII. STOCK DIVIDEND--RECAPITALIZATION--CONSOLIDATION.
--------------------------------------------------------------
If any stock dividend shall be declared upon the Common Stock or if the
Common Stock shall hereafter be subdivided, consolidated, or changed into other
securities of Corporation, or a successor corporation to Corporation, then in
each such event, shares of Common Stock which would be delivered pursuant to
exercise of any options shall, for the purpose of adjusting the number and kind
thereof, be treated as though outstanding immediately prior to the occurrence of
such event and the purchase price to be paid therefor shall be appropriately
adjusted to give effect thereto.
The grant of an option pursuant to the Plan shall not affect in any way the
right or power of Corporation to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
ARTICLE VIII. EXPIRATION AND TERMINATION OF PLAN.
--------------------------------------------------
Options may be granted pursuant to this Plan only within ten (10) years
following the earlier to occur of the date on which the Plan is originally
adopted by the Board of Directors and the date on which the Plan is originally
approved by stockholders of Corporation.
Options may be granted under the Plan at any time until the Plan is
terminated by the Board of Directors or until such earlier date when termination
of the Plan shall be required by applicable law. If not sooner terminated, the
Plan shall terminate automatically on June 30, 2004, which is ten years from the
-------
date on which the Plan was originally approved by the Board of Directors.
ARTICLE IX. AMENDMENT OF THE PLAN.
-----------------------------------
The Board of Directors may, insofar as permitted by law, from time to time,
with respect to any shares of Common Stock at the time not subject to
outstanding options, suspend or discontinue the Plan or revise or amend it in
any respect whatsoever except that, without approval of the holders of a
majority of the Common Stock of Corporation, no such revision or amendment shall
change the number of shares of Common Stock subject to the Plan (except as may
occur as a result of an occurrence described in Article VII), change the
designation of the class of employees eligible to receive options, remove the
administration of the Plan from the Committee, or render any member of the
Committee eligible to receive an option under the Plan while serving thereon.
Furthermore, the Plan may not, without the approval of the holders of a majority
of the Common Stock of Corporation, be amended in any manner that will cause
options issued
-7-
<PAGE>
under it to fail to meet the requirements of "incentive stock options" as
defined in Section 422 of the Code (except as provided in paragraph (f) of
Article V).
Article X. Granting of Options.
--------------------------------
The granting of any option pursuant to this Plan shall be entirely in
the discretion of the Committee and nothing herein contained shall be construed
to give any employee any right to participate under this Plan or to receive any
option under it. The granting of an option shall impose no duty upon the
Optionee to exercise such option.
Neither the adoption and maintenance of the Plan nor the granting of
an option pursuant to this Plan shall be deemed to constitute a contract of
employment between the Corporation and any employee or to be a condition of the
employment of any person. Nothing herein contained shall be deemed to (a) give
to any employee the right to be retained in the employ of the Corporation; (b)
interfere with the right of the Corporation to discharge or retire any employee
at any time; (c) be deemed to give to the Corporation the right to require an
employee to remain in its employ; or (d) interfere with the employee's right to
terminate his employment at any time.
Article XI. Government Regulations.
------------------------------------
This Plan and the granting and exercise of any option hereunder and
the obligations of Corporation to sell and deliver shares under any such option
shall be subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies as may be required.
Article XII. Proceeds from Sale of Stock.
------------------------------------------
Proceeds of the purchase of optioned shares by any Optionee shall be
for the general business purposes of Corporation.
Article XIII. Reporting Requirements.
--------------------------------------
The Committee shall furnish each Optionee hereunder with such
information relating to the exercise of any option granted hereunder to said
Optionee as is required under the Code and applicable State and Federal Security
laws.
Article XIV. Approval of Stockholders.
---------------------------------------
No option granted hereunder shall be exercisable until the Plan is
approved by the holders of a majority of the outstanding shares of the Common
Stock of Corporation.
-8-
<PAGE>
ARTICLE XV. INTERPRETATION.
----------------------------
The terms of this Plan are subject to all present and future regulations
and rulings of the Secretary of the Treasury or his delegate relating to the
qualification of Incentive Stock Options under Section 422 of the Code. If any
provision of the Plan conflicts with any such regulation or ruling, that
provision of the Plan shall be void and of no effect.
CONCENTRIC RESEARCH CORPORATION
By: /s/ Donald Schutt
----------------------------
Chief Operating Officer
By: /s/ Chad Shackley
----------------------------
Secretary
-9-
<PAGE>
EXHIBIT 4.3
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE
SECURITIES ACT OR, IN THE OPINION OF COMPANY COUNSEL SATISFACTORY TO THE ISSUER
OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933 AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION FROM REGISTRATION. INVESTORS SHOULD BE AWARE THAT THEY WILL BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
CONCENTRIC NETWORK CORPORATION
------------------------------
OPTION AGREEMENT
----------------
THIS OPTION AGREEMENT is entered into effective as of November 17, 1995,
between CONCENTRIC NETWORK CORPORATION, a Florida corporation (the "Company"),
and Tony Zeis (the "Optionee").
---------
WHEREAS, the Company and CRITICAL TECHNOLOGIES INCORPORATED ("CTI") are
parties to an Employee Services and Staffing Agreement (the "Employee
Agreement") pursuant to which, among other things, CTI has leased certain
employees to the Company and the Company has agreed to issue options to purchase
an aggregate of 900,000 shares of Common Stock of the Company ("Option Shares")
to certain employees of CTI which, pursuant to the Employee Agreement, will be
leased to the Company; and
WHEREAS, the Optionee is one of the persons selected by CTI to receive an
option pursuant to the Employee Agreement;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the parties hereto do hereby agree as follows;
1. Grant of Option. The Company hereby grants to the Optionee the right and
----------------
option (the "Option") to purchase all or any part of the number of Option Shares
set forth below, at a purchase price of $0.25 per share and on the other terms
and conditions herein set forth.
TOTAL NUMBER OF OPTION SHARES: 80,000
------
<PAGE>
2. Dates When Option Exercisable.
-----------------------------
(a) Except as otherwise provided in paragraph 8, Options for each of the
Option Shares will vest and become exercisable ratably over twelve (12) months,
beginning on November 1, 1995, with Options for one-twelfth (1/12) of the shares
subject to Option (rounded to the nearest whole share) becoming exercisable at
the end of each such month.
(b) Except as otherwise provided herein, the Option shall expire, to the
extent it has not already been exercised, at the close of business on November
1, 2005 (the 10th anniversary of the Employee Agreement) (the "Expiration
Date").
(c) In the event of termination of Optionee's employment with CTI prior to
or on October 31, 1999, or in the event that Optionee is not transferred to the
Company prior to or on October 31, 1999, Optionee may, but only within three
months from the date of such event, exercise the Option to the extent otherwise
so entitled on the date of such event. To the extent that the Optionee was not
entitled to exercise the Option on the date of such termination, or if the
Optionee does not exercise the Option within the time specified herein, the
Option shall terminate.
(d) Notwithstanding paragraphs 2(b) and 2(c), in the event, of (i) the
death of the Optionee, or (ii) termination of the Optionee's employment by
reason of his or her disability or incapacity, then the Option may be exercised
(but only to the extent it was exercisable by the Optionee on the date of his or
her death or termination), by the Optionee, or the Optionee's personal
representative, conservator (if any) or guardian (if any), as the case may be,
for a period of 12 months after the date of the Optionee's death or termination
(but not later than the Expiration Date). To the extent that the Optionee was
not entitled to exercise the Option on the date of death or termination, or if
the Optionee, or his or her personal representative, conservator (if any) or
guardian (if any), does not exercise the Option within the time specified
herein, the Option shall terminate.
3. Method of Exercising Option. The Optionee (or representative as provided
----------------------------
above) may exercise the Option hereby granted on one or more occasions at his or
her discretion, on each occasion for all or any part of the Option Shares for
which the Option is then exercisable, by each time delivering to the main
business office of the Company, addressed to the attention of its Chief
Executive Officer or Secretary, (i) a written notice stating his or her election
to exercise the Option and the number of Option Shares to be purchased, together
with (ii) cash, personal check, cashier's check or money order in full payment
of the purchase price of the Option Shares to be purchased, plus the amount of
any Federal and state withholding taxes payable by the Company as a result of
such exercise. The Option shall be deemed to be exercised only upon receipt of
such notice and payment by the Chief Executive Officer or Secretary. The
Company will advise the Optionee, upon the Optionee's reasonable prior request,
of the required amount of such taxes.
2
<PAGE>
4. Non-Transferability of Option. The Option may be exercised only by the
-----------------------------
Optionee or as otherwise provided above or in the Employee Agreement. The
rights granted by this Option may not be assigned, transferred, pledged or
hypothecated in any way, except by will or the laws of descent and distribution.
Such rights shall not be subject to execution, attachment or similar process.
In the event of the bankruptcy of the Optionee, or in the event of any
prohibited assignment, transfer, pledge, hypothecation or other disposition of
the Option, or the levy of any execution, attachment or similar process upon the
Option, the Option shall automatically expire and shall be null and void.
Notwithstanding the foregoing, however, with prior notice to the Company the
rights granted by this Option may be transferred between the Optionee in his or
her personal capacity and the Optionee as trustee of a trust (A) of which the
Optionee is both sole trustee and sole beneficiary during his or her lifetime,
and (B) all of which is treated under subpart E of Part I of Subchapter J of
Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, as
owned by the Optionee.
5. No Rights of Optionee as Shareholder. The Optionee shall have no rights
------------------------------------
respecting this Option or the Option Shares except as expressly set forth herein
or in the Employee Agreement; and the Optionee shall have no rights as a
shareholder with respect to any Option Shares until this Option has been duly
exercised as to such Option Shares in accordance with the terms hereof. The
grant of this Option shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its common stock or its capital or business structure, or to merge or to
consolidate, or to dissolve or liquidate, or to sell or transfer any or all of
its business or assets.
6. Restrictions on Exercise. This Options may not be exercised if the
------------------------
issuance of the Option Shares upon such exercise would constitute a violation of
any applicable federal or state securities or other law or regulation. As a
condition to the exercise of this Option, the Company may require Optionee to
make any representation and warranty to the Company as may be required by any
applicable law or regulation.
7. Securities Laws. Neither this Option nor any of the Option Shares have
---------------
been registered under the Securities Act, or the securities laws of any state.
By acceptance hereof, the Optionee acknowledges such fact and agrees that,
unless the Option Shares are so registered prior to exercise hereof, this Option
and any Option Shares will be held for investment and not with a view to
distribution or resale, and may not be made subject to a security interest,
pledged, hypothecated, or otherwise transferred without either an effective
registration statement under such Act and compliance with applicable state
securities laws, which may not be possible, or an opinion of legal counsel
satisfactory to the attorneys for the Company that such registration is not
required under such Act and that applicable state securities laws will not be
violated by such action; and the Optionee further agrees that the certificates
for such Option Shares shall bear a legend substantially to such effect.
3
<PAGE>
8. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. The number of Option Shares covered by the
-------------------------
Option, as well as the price per share of Option Shares, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the board of directors of the Company, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of the
Option Shares.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
--------------------------
or liquidation of the Company, Optionee shall have the right to exercise the
Option until fifteen (15) days prior to such transaction as to all of the Option
Shares. To the extent it has not been previously exercised, the Option will
terminate immediately prior to the consummation of such proposed action.
(c) Merger. Notwithstanding anything to the contrary contained herein,
------
the Option shall immediately become exercisable in full upon the effective date
of any merger or consolidation of the Company with or into any other entity, at
which time the Option shall automatically become an Option on exercise to
purchase, with respect to each Option Share purchasable hereunder (whether
vested or not) immediately before the consolidation or merger becomes effective,
the securities or other consideration to which a holder of one share of Common
Stock is entitled in the consolidation or merger without any change in or
payment in addition to the Exercise Price in effect immediately prior to the
merger or consolidation. The Company shall take any necessary steps in
connection with a consolidation or merger to assure that the provisions of this
Option shall thereafter be applicable, as nearly as reasonably may be, to any
securities or other consideration so deliverable on exercise of this Option. The
Company shall not consolidate or merge unless, prior to consummation, the
successor entity (if other than the Company) assumes the obligations of this
paragraph by written instrument executed and mailed to the Optionee at the
address of the Optionee on the books of the Company; provided, that if the
surviving entity does not assume this Option, such surviving entity shall pay
Optionee, in cash or in the form of stock of the surviving entity, an amount
equal to the amount which the total vested shares held by Optionee represents in
relation to the total purchase price paid for the Company in connection with the
aquisition of, or merger with, the Company.
4
<PAGE>
9. Limitations on Sale or Distribution of Securities. If requested in writing
-------------------------------------------------
by the Company or the managing underwriter, if any, of the Company's initial
public offering, the Optionee agrees not to effect any public sale or
distribution, including any sale pursuant to Rule 144 under the Securities Act,
of any Option or Option Shares, (other than as part of such underwritten public
offering) during the time period reasonably requested by the managing
underwriter, not to exceed 180 days (and the Company hereby also so agrees
(except that the Company may effect any sale or distribution of any such
securities pursuant to a registration on Form S-4 (if reasonably acceptable to
managing underwriter) or Form S-8, or any successor or similar form that is then
in effect) and agrees to use its best efforts to cause each holder of any equity
security or of any security convertible into or exchangeable or exercisable for
any equity security of the Company purchased from the Company at any time other
than in a public offering so to agree).
10. Tax Consequences. The Option is a nonstatutory stock option. Optionee
----------------
understands that he or she may incur federal and state income tax liability upon
the exercise of the Option and upon the subsequent disposition of the Option
Shares. Optionee represents that he or she has consulted with a tax advisor in
connection with the purchase or disposition of the Option Shares and that he or
she is not relying on the Company for tax advice. OPTIONEE ACKNOWLEDGES AND
AGREES THAT THE VESTING OF OPTION SHARES PURSUANT TO THE OPTION HEREOF IS EARNED
ONLY BY CONTINUING EMPLOYMENT AT THE WILL OF THE COMPANY OR CTI (NOT THROUGH THE
ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING THE OPTION SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS
AGREEMENT, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF
EMPLOYMENT BY THE COMPANY OR CTI, NOR SHALL IT INTERFERE IN ANY WAY WITH
OPTIONEE'S RIGHT OR THE COMPANY'S OR CTI'S RIGHT TO TERMINATE OPTIONEE'S
EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.
11. General; Governing Law. The Company shall at all times during the term of
----------------------
the Option reserve and keep available a number of shares of Common Stock equal
to the number of Option Shares, and shall pay all original issue and transfer
taxes with respect to the issue of Option Shares pursuant hereto and all other
fees and expenses necessarily incurred by the Company incurred in connection
therewith. This Option Agreement shall be governed by the internal substantive
laws, but not the choice of law rules, of the State of California.
5
<PAGE>
IN WITNESS WHEREOF, the Company and the Optionee have executed this Option
Agreement this 16th day of December, 1996, effective as of November 17, 1995.
Company:
CONCENTRIC NETWORK CORPORATION
By: ______________________________
Michael F. Anthofer
Senior Vice President and Chief
Financial Officer
Optionee:
_____________________________
Signature
_____________________________
Print Name
CRITICAL TECHNOLOGIES, INC. EMPLOYEE OPTION
6
<PAGE>
EXHIBIT A
---------
OPTION EXERCISE NOTICE
Concentric Network Corporation
10590 North Tantau Avenue
Cupertino, California 95014
Attention: Corporate Secretary
1. Exercise of Option. Effective as of today, __________, 19__, the
------------------
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_____________ shares of the Class A Common Stock (the "Shares") of Concentric
Network Corporation (the "Company") under and pursuant to the Stock Option
Agreement dated _________, 19__ (the "Option Agreement").
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price of the Shares, as set forth in the Option Agreement.
3. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Option Agreement and agrees to abide by and be
bound by its terms and conditions.
4. Rights as Shareholders. Until the issuance of the Shares (as
----------------------
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares shall be issued
to the Optionee as soon as practicable after the Option is exercised. No
adjustment shall be made for a dividend or other right for which the record date
is prior to the date of issuance.
5. Company's Right of First Refusal. Before any Shares held by Optionee
--------------------------------
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).
<PAGE>
(b) Exercise of Right of First Refusal. At any time within thirty
----------------------------------
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
--------------
Share purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in
---------------------------
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice, that any such sale or
other transfer is effected in accordance with any applicable securities laws and
that the Proposed Transferee agrees in writing that the provisions of this
Section shall continue to apply to the Shares in the hands of such Proposed
Transferee. If the Shares described in the Notice are not transferred to the
Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(f) Exception for Certain Family Transfers. Anything to the
--------------------------------------
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to the Optionee's immediate family or a trust for the benefit of
the Optionee's immediate family shall be exempt from the provisions of this
Section. "Immediate Family" as used herein shall mean spouse, lineal descendant
or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so transferred subject to
the provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First
-------------------------------------
Refusal shall terminate as to any Shares upon the first sale of Common Stock of
the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
<PAGE>
6. Tax Consultation. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. Optionee understands and agrees that the Company shall
-------
cause the legends set forth or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together with
any other legends that may be required by the Company or by state or federal
securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN
THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF
THESE SHARES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER
THE SECURITIES ACT OF 1933 AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION FROM REGISTRATION. INVESTORS
SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR, THE FINANCIAL
RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on
<PAGE>
its books any Shares that have been sold or otherwise transferred in violation
of any of the provisions of this Agreement or (ii) to treat as owner of such
Shares or to accord the right to vote or pay dividends to any purchaser or other
transferee to whom such Shares shall have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights
----------------------
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
9. Interpretation. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
10. Governing Law; Severability. This Agreement is governed by the
---------------------------
internal substantive laws but not the choice of law rules, of the State of
California.
11. Entire Agreement. The Option Agreement is incorporated herein by
----------------
reference. This Agreement, the Option Agreement and the Investment
Representation Statement constitute the entire agreement of the parties with
respect to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Company and Optionee with respect to the
subject matter hereof, and may not be modified adversely to the Optionee's
interest except by means of a writing signed by the Company and Optionee.
Submitted by: Accepted by:
OPTIONEE: CONCENTRIC NETWORK CORPORATION
_____________________________ ___________________________________
Signature By
_____________________________ ___________________________________
Print Name Print Name
___________________________________
Its
Address: ____________________ Address ___________________________
_____________________________ ___________________________________
Date:______________________________
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE: ____________________________________________
COMPANY: CONCENTRIC NETWORK CORPORATION
SECURITY: CLASS A COMMON STOCK
AMOUNT: ____________________________________________
DATE: ____________________________________________
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
1. This is a statement of my intention to purchase shares of Class A Common
Stock (the "Securities") of Concentric Network Corporation, knowing that said
Securities are not registered for offer or sale under the Missouri Uniform
Securities Act (Chapter 409, RSMo (1986))(the "Act").
2. Pursuant to clause (B), paragraph (10), subsection 409.402(b), of the Act,
I hereby represent that I am purchasing said Securities solely for investment
and do not intend to divide my participation with others or to resell or
otherwise dispose of all or any part of said Securities in Missouri. In making
the foregoing representations I understand that the statutory exemption of
paragraph (10), subsection 409.402(b), of the Act, would not be available if,
notwithstanding my said representation, I have in mind merely acquiring said
Securities for resale or other disposition upon the occurrence or nonoccurrence
of some predetermined event.
3. I acknowledge that Concentric Network Corporation is relying on the
statutory exemption of paragraph (10), subsection 409.402(b), of the Act, basing
such reliance in part on my said representations.
4. Further, I acknowledge that, unless said Securities are registered under
the Act, I may not resell, hypothecate, transfer or assign or make other
disposition of said Securities in the state of Missouri, except in transactions
exempted from the registration requirements of the Act.
5. I have received and examined financial statements of Concentric Network
Corporation for the _________________ (period or periods) and other data that I
consider sufficient to enable me to form a decision concerning my purchase.
<PAGE>
6. I am aware of the Company's business affairs and financial condition and
have acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Securities. I am acquiring these
Securities for investment for my own account only and not with a view to, or for
resale in connection with, any "distribution" thereof within the meaning of the
Securities Act of 1933, as amended (the "Securities Act").
7. I acknowledge and understand that the Securities constitute "restricted
securities" under the Securities Act and have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of my investment intent
as expressed herein. In this connection, I understand that, in the view of the
Securities and Exchange Commission, the statutory basis for such exemption may
be unavailable if my representation was predicated solely upon a present
intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Securities, or for a period of one year or
any other fixed period in the future. I further understand that the Securities
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. I further
acknowledge and understand that the Company is under no obligation to register
the Securities. I understand that the certificate evidencing the Securities will
be imprinted with a legend that prohibits the transfer of the Securities unless
they are registered or such registration is not required in the opinion of
counsel satisfactory to the Company, and any other legend required under
applicable state securities laws.
8. I am familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly from the
issuer thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at
the time of the grant of the Option to me, the exercise will be exempt from
registration under the Securities Act. In the event the Company becomes subject
to the reporting requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, ninety (90) days thereafter (or such longer period as any market
stand-off agreement may require) the Securities exempt under Rule 701 may be
resold, subject to the satisfaction of certain of the conditions specified by
Rule 144, including: (1) the resale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, (3) the amount of Securities being sold during any
three-month period not exceeding the limitations specified in Rule 144(e), and
(4) the timely filing of a Form 144, if applicable.
9. In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the Securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than two years after the later of the date the Securities were
sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than three years, the satisfaction of the conditions set forth
in sections (1), (2), (3) and (4) of the paragraph immediately above.
<PAGE>
10. I further understand that in the event all of the applicable requirements
of Rule 701 or 144 are not satisfied, registration under the Securities Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rules 144 and 701 are not
exclusive, the Staff of the Securities and Exchange Commission has expressed its
opinion that persons proposing to sell private placement securities other than
in a registered offering and otherwise than pursuant to Rules 144 or 701 will
have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk. I understand that no assurances can be given that any such other
registration exemption will be available in such event.
11. I understand that the certificate evidencing the Securities will be
imprinted with a legend that restricts the transfer or resale except as
permitted under the Securities Act and applicable state securities laws. I am
aware that I will be required to bear the financial risks of this investment for
an indefinite period of time.
Signature of Optionee:
______________________________________
Print Name
Date:_______________________, 19______
<PAGE>
[WILSON SONSINI GOODRICH & ROSATI LETTERHEAD APPEARS HERE]
EXHIBIT 5.1
August 7, 1997
Concentric Network Corporation
10590 N. Tantau Avenue
Cupertino, CA 95014
Re: REGISTRATION STATEMENT ON FORM S-8
----------------------------------
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-8 (the
"Registration Statement") to be filed by Concenctric Network Corporation, a
Delaware corporation (the "Company"), with the Securities and Exchange
Commission on or about August 8, 1997 in connection with the registration under
the Securities Act of 1933, as amended (the "Act"), of an aggregate of 3,882,653
shares of the Company's Common Stock (the "Shares") as follows: (A) 53,344
shares reserved for issuance under options granted pursuant to the Company's
1993 Incentive Stock Option Plan; (B) 344,296 shares reserved for issuance under
the Company's 1995 Stock Incentive Plan for Employees and Consultants; (C)
948,764 shares reserved for issuance under the Company's Amended and Restated
1996 Stock Plan; (D) 1,500,000 shares reserved for issuance under the Company's
1997 Stock Plan; (E) 500,000 shares of Common Stock reserved for issuance under
the Company's 1997 Employee Stock Purchase Plan, and (F) 536,249 shares reserved
for issuance under Option Agreements between the Company and certain
optionholders. As your legal counsel, we have reviewed the actions taken and
proposed to be taken by you in connection with the sale and issuance of the
Shares by the Company under the foregoing plans and options.
It is our opinion that, upon exercise of options in accordance with the
foregoing plans and option agreements, the Shares will be legally and validly
issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, and in any prospectuses forming a part thereof and any
subsequent amendment thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to (a) the Incentive Stock Option Plan, (b) the 1995 Stock
Incentive Plan for Employees and Consultants, (c) the Option Agreements, (d) the
Amended and Restated 1996 Stock Option Plan, (e) the 1997 Stock Plan, and (f)
the 1997 Employee Stock Purchase Plan of our report dated March 14, 1997 (except
for Note 1 "The Company" and Note 5, as to which the date is June 23, 1997, and
Note 10, as to which the date is July 30, 1997), with respect to the financial
statements of Concentric Network Corporation included in its Registration
Statement (Form S-1) for the year ended December 31, 1996, filed with the
Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
San Jose, California
August 8, 1997
