<PAGE>
As filed with the Securities and Exchange Commission on December 14, 1999
Registration No. 333-_______
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
EXODUS COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 77-0403076
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
2831 Mission College Blvd.
Santa Clara, CA 95054
(408) 346-2200
(Address and Telephone Number of Registrant's Principal Executive Offices)
Stock options granted under the Service Metrics, Inc. 1998 Stock Option Plan
assumed by Registrant
(Full Title of the Plans)
Ellen M. Hancock
President and Chief Executive Officer
Exodus Communications, Inc.
2831 Mission College Blvd.
Santa Clara, CA 95054
(408) 346-2200
(Name, Address and Telephone Number, Including Area Code, of Agent For Service)
Copies to:
Robert A. Freedman, Esq.
Andrew Y. Luh, Esq.
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Amount Proposed Proposed Maximum Amount of
to be Maximum Offering Aggregate Offering Registration
Title of Securities to be Registered Registered Price Per Share Price Fee
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value 376,331 (1) $12.40 (2) $4,664,983 $1,231.56
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Shares subject to assumed outstanding stock options as of November 23, 1999
under the Service Metrics, Inc. 1998 Stock Option Plan. This number does
not reflect the two-for-one stock split effected in the form of a stock
dividend to stockholders of record as of November 30, 1999.
(2) Represents weighted average per share exercise price for such outstanding
options, calculated pursuant to Rule 457(h)(1) solely for the purpose of
calculating the registration fee.
<PAGE>
EXODUS COMMUNICATIONS, INC.
REGISTRATION STATEMENT ON FORM S-8
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
- ------ ---------------------------------------
The following documents filed with the Securities and Exchange Commission
(the "Commission") are incorporated herein by reference:
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 filed with the Commission on February 22, 1999.
(b) The Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999 filed with the Commission on May 17, 1999, as amended
by a Form 10-Q/A filed with the Commission on June 25, 1999.
(c) The Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999 filed with the Commission on August 13, 1999.
(d) The Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999 filed with the Commission on November 12, 1999.
(e) The Registrant's Current Reports on Form 8-K filed with the Commission
on January 29, 1999, February 22, 1999, March 2, 1999, June 18, 1999,
August 11, 1999 (as amended on October 12, 1999 and November 29,
1999), November 29, 1999 (two reports), and December 3, 1999.
(f) The description of the Registrant's Common Stock contained in the
Registrant's Registration Statement on Form 8-A filed with the
Commission on February 13, 1998 under Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), including any
amendment or report filed for the purpose of updating such
description.
(g) The description of the Registrant's Preferred Stock Purchase Rights
contained in the Registrant's Registration Statement on Form 8-A filed
with the Commission on January 29, 1999 under Section 12(g) of the
Exchange Act, as amended by a Form 8-A/A filed with the Commission on
November 29, 1999, including any amendment or report filed for the
purpose of updating such description.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-
effective amendment which indicates that all securities registered hereby have
been sold or which deregisters all securities then remaining unsold, shall be
deemed incorporated by reference herein and to be a part hereof from the date of
the 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 and Limitation of Liability.
- ------ ---------------------------------------------------------------------
As permitted by Section 145 of the Delaware General Corporation Law, the
Registrant's Certificate of Incorporation includes a provision that eliminates
the personal liability of its directors to the Registrant or its
2
<PAGE>
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law or (iv) for any transaction
from which the director derived an improper personal benefit. In addition, as
permitted by Section 145 of the Delaware General Corporation Law, the Bylaws of
the Registrant provide that: (i) the Registrant is required to indemnify its
directors and executive officers to the fullest extent permitted by the Delaware
General Corporation Law; (ii) the Registrant may, in its discretion, indemnify
other officers, employees and agents as set forth in the Delaware General
Corporation Law; (iii) upon receipt of an undertaking to repay such advances if
indemnification is determined to be unavailable, the Registrant is required to
advance expenses, as incurred, to its directors and executive officers to the
fullest extent permitted by the Delaware General Corporation Law in connection
with a proceeding (except if a determination is reasonably and promptly made by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to the proceeding or, in certain circumstances, by
independent legal counsel in a written opinion that the facts known to the
decision-making party demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in, or
not opposed to, the best interests of the corporation); (iv) the rights
conferred in the Bylaws are not exclusive and the Registrant is authorized to
enter into indemnification agreements with its directors, officers and employees
and agents; (v) the Registrant may not retroactively amend the Bylaw provisions
relating to indemnity; and (vi) to the fullest extent permitted by the Delaware
General Corporation Law, a director or executive officer will be deemed to have
acted in good faith and in a manner he or she reasonably believed to be in, or
not opposed to, the best interests of the Registrant and, with respect to any
criminal action or proceeding, to have had no reasonable cause to believe that
his or her conduct was unlawful if his or her action is based on the records or
books of account of the corporation or on information supplied to him or her by
officers of the corporation in the course of their duties or on the advice of
legal counsel for the corporation or on information or records given or reports
made to the corporation by independent certified public accountants or
appraisers or other experts.
The Registrant's policy is to enter into indemnification agreements with
each of its directors and executive officers. The indemnification agreements
provide that directors and executive officers will be indemnified and held
harmless to the fullest possible extent permitted by law including against all
expenses (including attorneys' fees), judgments, fines and settlement amounts
paid or reasonably incurred by them in any action, suit or proceeding, including
any derivative action by or in the right of the Registrant, on account of their
services as directors, officers, employees or agents of the Registrant or as
directors, officers, employees or agents of any other company or enterprise when
they are serving in such capacities at the request of the Registrant. The
Registrant will not be obligated pursuant to the agreements to indemnify or
advance expenses to an indemnified party with respect to proceedings or claims
(i) initiated or brought voluntarily by the indemnified party and not by way of
defense, except with respect to a proceeding to establish or enforce a right to
indemnification under the indemnification agreements or any other agreement or
insurance policy or under the Registrant's Certificate of Incorporation or
Bylaws now or hereafter in effect relating to indemnification, or authorized by
the Board of Directors or as otherwise required under Delaware statute or law,
regardless of whether the indemnified party is ultimately determined to be
entitled to such indemnification, (ii) for expenses and the payment of profits
arising from the purchase and sale by the indemnified party of securities in
violation of Section 16(b) of the Exchange Act or any similar successor statute
or (iii) if a final decision by a court having jurisdiction in the matter shall
determine that such indemnification is not lawful.
The indemnification agreement also provides for contribution in certain
situations in which the Registrant and a director or executive officer are
jointly liable but indemnification is unavailable, such contribution to be based
on the relative benefits received and the relative fault of the Registrant and
the director or executive officer. No contribution is allowed to a person found
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act of 1933, as amended (the "Securities Act")) from any person
who was not found guilty of such fraudulent misrepresentation.
The indemnification agreement requires a director or executive officer to
reimburse the Registrant for all expenses advanced only to the extent it is
ultimately determined that the director or executive officer is not entitled,
under Delaware law, the Bylaws, the indemnification agreement or otherwise, to
be indemnified for such expenses. The indemnification agreement provides that
it is not exclusive of any rights a director or executive officer may
3
<PAGE>
have under the Certificate of Incorporation, Bylaws, other agreements, any
majority-in-interest vote of the stockholders or vote of disinterested
directors, Delaware law or otherwise.
The indemnification provision in the Bylaws, and the form of
indemnification agreements entered into between the Registrant and its directors
and executive officers, may be sufficiently broad to permit indemnification of
the Registrant's executive officers and directors for liabilities arising under
the Securities Act.
As authorized by the Registrant's Bylaws, the Registrant, with approval by
the Board, maintains director and officer liability insurance.
In addition, Thadeus Mocarski, a director of the Registrant, is indemnified
in certain circumstances by Fleet Financial Group, Inc.
Item 7. Exemption from Registration Claimed.
- ------ -----------------------------------
Not applicable.
Item 8. Exhibits.
- ------ --------
4.01 Registrant's Restated Certificate of Incorporation, as amended
(incorporated herein by reference to Exhibit 4.01 of the
Registrant's Registration Statement on Form S-8 filed with the
Commission on July 19, 1999).
4.02 Certificate of Designations specifying the terms of the Series A
Junior Participating Preferred Stock of the Registrant, as filed
with the Delaware Secretary of State on January 28, 1999
(incorporated herein by reference to Exhibit 3.02 of the
Registrant's Registration Statement on Form 8-A filed with the
Commission on January 29, 1999).
4.03 Registrant's Bylaws (incorporated herein by reference to Exhibit
3.06 of the Registrant's Registration Statement on Form S-1,
Registration No. 333-44469, declared effective by the Commission on
March 18, 1998.)
4.04 Rights Agreement dated January 27, 1999 between Registrant and
BankBoston, N.A., as Rights Agent (incorporated herein by reference
to Exhibit 4.04 of the Registrant's Registration Statement on Form
8-A filed with the Commission on January 29, 1999).
4.05 Amendment to Rights Agreement dated October 20, 1999 between
Registrant and BankBoston, N.A., as Rights Agent (incorporated
herein by reference to Exhibit 4.05 of the Registrant's Amended
Registration Statement on Form 8-A filed with the Commission on
November 29, 1999).
4.06 Service Metrics, Inc. 1998 Stock Option Plan and related forms of
Stock Option Grant Notice, Employee Stock Option Agreement, Non-
Employee Stock Option Agreement and Notice of Exercise. (1)
5.01 Opinion of Fenwick & West LLP.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of KPMG LLP, independent auditors.
23.03 Consent of Deloitte & Touche LLP, independent auditors.
24.01 Power of Attorney (see page 7).
________________
4
<PAGE>
(1) Service Metrics, Inc. ("SMI") is a Delaware corporation that was acquired by
the Registrant on November 23, 1999 (through a merger of a wholly-owned
subsidiary of the Registrant with and into SMI) pursuant to the terms of an
Agreement and Plan of Reorganization dated October 26, 1999, in which the
Registrant agreed to assume all outstanding options of SMI under its 1998
Stock Option Plan as of November 23, 1999.
Item 9. Undertakings.
- ------ ------------
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective registration statement; and
(iii) 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.
Provided, however, that paragraphs (1)(i) and (1)(ii) above do not
-------- -------
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or furnished to
the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, 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 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.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) 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.
- ----
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the
5
<PAGE>
prospectus is sent or given, the latest quarterly report that is specifically
incorporated by reference in the prospectus to provide such interim financial
information.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions discussed in Item 6 hereof, or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
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 hereby, the Registrant 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 and will be governed by
the final adjudication of such issue.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
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 Santa Clara, State of California, on this 14th day of
December, 1999.
EXODUS COMMUNICATIONS, INC.
By: /s/ Richard S. Stoltz
---------------------------------------------
Richard S. Stoltz
Executive Vice President, Finance, Chief
Financial Officer and Chief Operating Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Ellen M. Hancock and Richard S. Stoltz,
and each of them, his true and lawful attorneys-in-fact and agents with full
power of substitution, for him or her and in his or her name, place and stead,
in any and all capacities, to sign any and all amendments (including post-
effective amendments) to this Registration Statement on Form S-8, and to file
the same with all exhibits thereto and all documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or his, her or their substitute or substitutes, may
lawfully do or cause to be done or by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
Principal Executive Officer:
<S> <C> <C>
/s/ Ellen M. Hancock President, Chief Executive Officer and December 14, 1999
- ---------------------------------
Ellen M. Hancock Director
Principal Financial Officer and
Principal Accounting Officer:
/s/ Richard S. Stoltz Executive Vice President, Finance, December 14, 1999
- ---------------------------------
Richard S. Stoltz Chief Financial Officer and
Chief Operating Officer
Additional Directors:
/s/ K.B. Chandrasekhar Chairman of the December 14, 1999
- ---------------------------------
K.B. Chandrasekhar Board of Directors
/s/ Frederick W.W. Bolander Director December 14, 1999
- ---------------------------------
Frederick W.W. Bolander
</TABLE>
7
<PAGE>
/s/ Mark Dubovoy Director December 14, 1999
- ---------------------------------
Mark Dubovoy
/s/ John R. Dougery Director December 14, 1999
- ---------------------------------
John R. Dougery
/s/ Max D. Hopper Director December 14, 1999
- ---------------------------------
Max D. Hopper
/s/ Peter A. Howley Director December 14, 1999
- ---------------------------------
Peter A. Howley
/s/ Daniel C. Lynch Director December 14, 1999
- ---------------------------------
Daniel C. Lynch
/s/ Thadeus Mocarski Director December 14, 1999
- ---------------------------------
Thadeus Mocarski
/s/ Naomi Seligman Director December 14, 1999
- ---------------------------------
Naomi Seligman
8
<PAGE>
Exhibit Index
-------------
Exhibit No. Description
- ---------- -----------
4.01 Registrant's Restated Certificate of Incorporation, as amended
(incorporated herein by reference to Exhibit 4.01 of the
Registrant's Registration Statement on Form S-8 filed with the
Commission on July 19, 1999).
4.02 Certificate of Designations specifying the terms of the Series A
Junior Participating Preferred Stock of the Registrant, as filed
with the Delaware Secretary of State on January 28, 1999
(incorporated herein by reference to Exhibit 3.02 of the
Registrant's Registration Statement on Form 8-A filed with the
Commission on January 29, 1999).
4.03 Registrant's Bylaws (incorporated herein by reference to Exhibit
3.06 of the Registrant's Registration Statement on Form S-1,
Registration No. 333-44469, declared effective by the Commission
on March 18, 1998.)
4.04 Rights Agreement, dated January 27, 1999, between Registrant and
BankBoston, N.A., as Rights Agent (incorporated herein by
reference to Exhibit 4.04 of the Registrant's Registration
Statement on Form 8-A filed with the Commission on January 29,
1999).
4.05 Amendment to Rights Agreement dated October 20, 1999 between
Registrant and BankBoston, N.A., as Rights Agent (incorporated
herein by reference to Exhibit 4.05 of the Registrant's Amended
Registration Statement on Form 8-A filed with the Commission on
November 29, 1999).
4.06 Service Metrics, Inc. 1998 Stock Option Plan and related forms of
Stock Option Grant Notice, Employee Stock Option Agreement, Non-
Employee Stock Option Agreement and Notice of Exercise. (1)
5.01 Opinion of Fenwick & West LLP.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of KPMG LLP, independent auditors.
23.03 Consent of Deloitte & Touche LLP, independent auditors.
24.01 Power of Attorney (see page 7).
___________________
(1) Service Metrics, Inc. ("SMI") is a Delaware corporation that was acquired by
the Registrant on November 23, 1999 (through a merger of a wholly-owned
subsidiary of the Registrant with and into SMI) pursuant to the terms of an
Agreement and Plan of Reorganization dated October 26, 1999, in which the
Registrant agreed to assume all outstanding options of SMI under its 1998
Stock Option Plan as of November 23, 1999.
9
<PAGE>
Exhibit 4.06
SERVICE METRICS, INC.
1998 STOCK OPTION PLAN
Adopted July 8, 1998
Approved by Stockholders July 8, 1998
Termination Date July 8, 2008
1. Purposes.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options and (ii)
Nonstatutory Stock Options.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultant, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall, in
the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "Company" means Service Metrics, Inc., a Delaware corporation.
(f) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
<PAGE>
(g) "Continuous Service" means that the service of an individual to the
Company, whether as an Employee, Director or Consultant, is not interrupted or
terminated. The Board or the chief executive officer of the Company may
determine, in that party's sole discretion, whether Continuous Service shall be
considered interrupted in the case of: (i) any leave of absence approved by the
Board or the chief executive officer of the Company, including sick leave,
military leave, or any other personal leave; or (ii) transfers between the
Company, Affiliates or their successors.
(h) "Covered Employee" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(i) "Director" means a member of the Board of Directors of the Company.
(j) "Employee" means any person, including officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company or an Affiliate.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(l) "Fair Market Value" means, as of any date, the value of the common
stock of the Company determined as follows:
(i) If the common stock is listed on any established stock exchange
or traded on the Nasdaq National Market or The Nasdaq SmallCap Market, the Fair
Market Value of a share of common stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Company's common stock) on the last market trading day prior to
the day of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable.
(ii) In the absence of such markets for the common stock, the Fair
Market Value shall be determined in good faith by the Board.
(m) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(n) "Listing Date" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system.
(o) "Non-Employee Director" means a Director who either (i) is not a
current Employee or officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a
2.
<PAGE>
consultant or in any capacity other than as a Director (except for an amount as
to which disclosure would not be required under Item 404(a) of Regulation S-K
promulgated pursuant to the Securities Act ("Regulation S-K")), does not possess
an interest in any other transaction as to which disclosure would be required
under Item 404(a) of Regulation S-K, and is not engaged in a business
relationship as to which disclosure would be required under Item 404(b) of
Regulation S-K; or (ii) is otherwise considered a "non-employee director" for
purposes of Rule 16b-3.
(p) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(q) "Option" means a stock option granted pursuant to the Plan.
(r) "Option Agreement" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(s) "Optionee" means a person to whom an Option is granted pursuant to the
Plan, or if applicable, such other person who holds an outstanding Option.
(t) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(u) "Plan" means this 1998 Stock Option Plan.
(v) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.
(w) "Securities Act" means the Securities Act of 1933, as amended.
3. Administration.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how each Option shall be
granted; whether an Option will be an Incentive Stock Option or a Nonstatutory
Stock Option; the provisions of each Option granted (which need not be
identical), including the time or times such Option may be exercised
3.
<PAGE>
in whole or in part; and the number of shares for which an Option shall be
granted to each such person.
(2) To construe and interpret the Plan and Options granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Option Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.
(3) To amend the Plan or an Option as provided in Section 11.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee of
the Board composed of two (2) or more members (the "Committee"), all of the
members of which Committee may be Non-Employee Directors and/or Outside
Directors. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee of two
(2) or more Outside Directors any of the administrative powers the Committee is
authorized to exercise (and references in this Plan to the Board shall
thereafter be to the Committee or such a subcommittee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan. Additionally,
prior to the Listing Date, and notwithstanding anything to the contrary
contained herein, the Board may delegate administration of the Plan to a
committee of one or more members of the Board and the term "Committee" shall
apply to any person or persons to whom such authority has been delegated. In
addition, notwithstanding anything in this Section 3 to the contrary, the Board
or the Committee may delegate to a committee of one or more members of the Board
the authority to grant Options to eligible persons who (x) are not then subject
to Section 16 of the Exchange Act and/or (y) are either (i) not then Covered
Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Option, or (ii) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code.
(d) All actions taken and all interpretations and determinations made by
the Board or Committee in good faith (including determinations of Fair Market
Value) shall be final and binding upon all Optionees, the Company and all other
interested persons. No member of the Board or Committee shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan, and all members of the Board and Committee shall, in
addition to their right as directors, be fully protected by the Company with
respect to any such action, determination or interpretation.
4.
<PAGE>
4. Shares Subject to the Plan.
(a) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed four million seventy-four thousand nine hundred forty-one (4,074,941)
shares of the Company's common stock. If any Option shall for any reason expire
or otherwise terminate, in whole or in part, without having been exercised in
full, the stock not purchased under such Option shall revert to and again become
available for issuance under the Plan. If any shares of Common Stock acquired
pursuant to the exercise of an Option shall for any reason be repurchased by the
Company under a repurchase option provided under the Plan, the stock repurchased
by the Company under such repurchase option shall revert to and again become
available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. Eligibility.
(a) Incentive Stock Options may be granted only to Employees. Nonstatutory
Stock Options may be granted only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Incentive Stock Option is at
least one hundred ten percent (110%) of the Fair Market Value of such stock at
the date of grant and the Incentive Stock Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options covering
more than eight hundred thousand (800,000) shares of the Company's common stock
in any calendar year. This subsection 5(c) shall not apply prior to the Listing
Date and, following the Listing Date, shall not apply until (i) the earliest of:
(A) the first material modification of the Plan (including any increase to the
number of shares reserved for issuance under the Plan in accordance with Section
4); (B) the issuance of all of the shares of common stock reserved for issuance
under the Plan; (C) the expiration of the Plan; or (D) the first meeting of
stockholders at which directors are to be elected that occurs after the close of
the third calendar year following the calendar year in which occurred the first
registration of an equity security under section 12 of the Exchange Act; or (ii)
such other date required by Section 162(m) of the Code and the rules and
regulations promulgated thereunder.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
5.
<PAGE>
(a) Term. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) Price. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Incentive Stock Option on the date the Incentive Stock Option is
granted, or such greater amount as required by Section 5(b). The exercise price
of each Nonstatutory Stock Option shall be determined by the Board.
Notwithstanding the foregoing, the Board may grant an Option with an exercise
price lower than that set forth above if such Option is granted as part of a
transaction to which section 424(a) of the Code applies.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board. In the case of any deferred
payment arrangement, interest shall be compounded at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any amounts other than
amounts stated to be interest under the deferred payment arrangement. In
addition, to the extent required by applicable law, the "par value" of the stock
will not be subject to any deferred payment arrangement and will be paid in cash
at the time the Option is exercised.
(d) Transferability. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person. A Nonstatutory Stock Option may be transferable
to the extent expressly provided in the Option Agreement; provided, however,
that if the Option Agreement does not specifically provide for transferability,
then such Nonstatutory Stock Option shall not be transferable except by will or
by the laws of descent and distribution. Notwithstanding the foregoing, the
person to whom the Option is granted may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionee, shall thereafter be entitled to exercise
the Option.
(e) Vesting. The total number of shares of stock subject to an Option
shall vest or become exercisable as provided in the Option Agreement.
(f) Securities Law Compliance. The Company may require any Optionee,
or any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written
6.
<PAGE>
assurances satisfactory to the Company stating that such person is acquiring the
stock subject to the Option for such person's own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise of the Option
has been registered under a then currently effective registration statement
under the Securities Act, or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may require the Optionee to provide such other representations, written
assurances or information which the Company shall determine is necessary,
desirable or appropriate to comply with applicable securities and other laws as
a condition of granting an Option to such Optionee or permitting the Optionee to
exercise such Option. The Company may, upon advice of counsel to the Company,
place legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.
(g) Termination of Continuous Service. If an Optionee's Continuous Service
terminates (other than upon the Optionee's death or disability), the Optionee
may exercise his or her Option (to the extent that the Optionee was entitled to
exercise it as of the date of termination) but only within such period of time
ending on the earlier of (i) the date three (3) months after the termination of
the Optionee's Continuous Service, or such longer or shorter period specified in
the Option Agreement, or (ii) the expiration of the term of the Option as set
forth in the Option Agreement; provided, however, if the Optionee is terminated
for cause, then the Option shall terminate on the date Optionee's Continuous
Service ceases. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionee's Continuous Service (other
than upon the Optionee's death or disability) would result in liability under
Section 16(b) of the Exchange Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in the Option
Agreement, or (ii) the tenth (10/th/) day after the last date on which such
exercise would result in such liability under Section 16(b) of the Exchange Act.
Finally, an Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Service (other
than upon the Optionee's death or disability) would be prohibited at any time
solely because the issuance of shares would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in Section
6(a), or (ii) the expiration of a period of three (3) months after the
termination of the Optionee's Continuous Service during which the exercise of
the Option would not be in violation of such registration requirements.
(h) Disability of Optionee. If an Optionee's Continuous Service terminates
as a result of the Optionee's disability (as defined in Section 22(c)(3) of the
Code), the Optionee may exercise the Option (to the extent that the Optionee was
entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period specified in the
Option Agreement), or (ii) the expiration of the term of the Option as set forth
in the Option Agreement.
7.
<PAGE>
If, at the date of termination, the Optionee is not entitled to exercise the
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after termination, the Optionee does not exercise the Option within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
(i) Death of Optionee. If an Optionee dies during, or within the three-
month or twelve-month periods referred to above after the termination of, the
Optionee's Continuous Service, the Option may be exercised (to the extent the
Optionee was entitled to exercise the Option as of the date of death) by the
Optionee's estate, by a person who acquired the right to exercise the Option by
bequest or inheritance or by a person designated to exercise the option upon the
Optionee's death pursuant to subsection 6(d), but only within the period ending
on the earlier of (i) the date twelve (12) months following the date of death
(or such longer or shorter period specified in the Option Agreement), or (ii)
the expiration of the term of such Option as set forth in the Option Agreement.
If, at the time of death, the Optionee was not entitled to exercise the entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to and again become available for issuance under the Plan. If, after
death, the Option is not exercised within the time specified herein, the Option
shall terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(j) Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
(k) Right of First Refusal. The Option may, but need not, include a
provision whereby the Company may elect, prior to the date of the first
registration of an equity security of the Company under Section 12 of the
Exchange Act, to exercise a right of first refusal following receipt of notice
from the Optionee of the intent to transfer all or any part of the shares
exercised pursuant to the Option.
(l) Withholding. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2) authorizing
the Company to withhold shares from the shares of the common stock otherwise
issuable to the Optionee as a result of the exercise of the Option; or (3)
delivering to the Company owned and unencumbered shares of the common stock of
the Company.
8.
<PAGE>
7. Covenants of the Company.
(a) During the terms of the Options, the Company shall keep available at
all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is unable
to obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of
stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options unless and until
such authority is obtained.
8. Use of Proceeds from Stock.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. Miscellaneous.
(a) The Board shall have the power to accelerate the time at which an
Option may first be exercised or the time during which an Option or any part
thereof will vest, notwithstanding the provisions in the Option stating the time
at which it may first be exercised or the time during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
pursuant to this Plan shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director, Consultant or
Optionee any right to continue in the employ of the Company or any Affiliate (or
to continue acting as a Director or Consultant) or shall affect the right of the
Company or any Affiliate to terminate the employment of any Employee with or
without cause, the right of the Company's Board of Directors and/or the
Company's stockholders to remove any Director pursuant to the terms of the
Company's Bylaws and the provisions of applicable laws, or the right to
terminate the relationship of any Consultant pursuant to the terms of such
Consultant's agreement with the Company or Affiliate to which Consultant is
providing services.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
9.
<PAGE>
(e) The Board or the Committee shall have the authority to effect, at any
time and from time to time (i) the repricing of any outstanding Options under
the Plan and/or (ii) with the consent of the affected holders of Options, the
cancellation of any outstanding Options and the grant in substitution therefor
of new Options under the Plan covering the same or different numbers of shares
of common stock, but having an exercise price per share not less than one
hundred percent (100%) of the Fair Market Value in the case of an Incentive
Stock Option (or, in the case of a ten percent (10%) stockholder, not less than
one hundred and ten percent (110%) of the Fair Market Value) per share of Common
Stock on the new grant date. Notwithstanding the foregoing, the Board may grant
an Option with an exercise price lower than that set forth above if such Option
is granted as part of a transaction to which section 424(c) of the Code applies.
Shares subject to an Option canceled under this Section 9 shall continue to be
counted against the maximum award of Options permitted to be granted pursuant to
subsection 5(c) of the Plan. The repricing of an Option under this Section 9,
resulting in a reduction of the exercise price, shall be deemed to be a
cancellation of the original Option and the grant of a substitute Option; in the
event of such repricing, both the original and the substituted Options shall be
counted against the maximum awards of Options permitted to be granted pursuant
to subsection 5(c) of the Plan. The provisions of this subsection 9(e) shall be
applicable only to the extent required by Section 162(m) of the Code.
10. Adjustments Upon Changes in Stock.
(a) If any change is made in the stock subject to the Plan, or subject to
any Option, without the receipt of consideration by the Company (through merger,
consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan, and the outstanding Options will be
appropriately adjusted in the class(es) and number of shares and price per share
of stock subject to such outstanding Options. Such adjustments shall be made by
the Board or the Committee, the determination of which shall be final, binding
and conclusive. (The conversion of any convertible securities of the Company
shall not be treated as a "transaction not involving the receipt of
consideration by the Company".)
(b) In the event of an Acquisition (as defined herein), then (i) any
surviving or acquiring corporation shall assume Options outstanding under the
Plan or shall substitute similar options (including an option to acquire the
same consideration paid to the stockholders in the Acquisition) for those
outstanding under the Plan or (ii) in the event any surviving or acquiring
corporation refuses to continue or assume such Options, or to substitute similar
options for those outstanding under the Plan, then such Options shall be
terminated if not exercised prior to such event.
For purposes of this Plan, an "Acquisition" shall mean: (i) any
consolidation or merger of the Company with or into any other corporation any
consolidation or merger of the Company with or into any other corporation or
other entity or person, or any other corporate reorganization, in which the
stockholders of the Company immediately prior to such consolidation, merger or
reorganization, own less than 50% of the Company's voting power
10.
<PAGE>
immediately after such consolidation, merger or reorganization; provided, that,
the foregoing shall only be deemed an Acquisition if the stockholders of the
Company or its successor immediately prior to such consolidation, merger or
reorganization: (1) hold less than 50% of the outstanding securities of the
surviving company following the merger or consolidation or, (2) in the event
that the securities of an affiliated entity of the surviving corporation are
issued to the stockholders of the Company in the transaction, hold less than 50%
of the outstanding securities of such entity corporation, or (B) any transaction
or series of related transactions in which in excess of fifty percent (50%) of
the Company's voting power is transferred; or (ii) a sale, lease or other
disposition of all or substantially all of the assets of the Company.
11. Amendment of the Plan and Options.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent stockholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Option granted before amendment of
the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Options; provided, however, that the rights under any Option
shall not be impaired or obligations under any Option increased by any such
amendment unless (i) the Company requests the consent of the person to whom the
Option was granted and (ii) such person consents in writing.
12. Termination or Suspension of the Plan.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate ten (10) years from the date the Plan is
adopted by the Board or approved by the stockholders of the Company, whichever
is earlier. No Options may be granted under the Plan while the Plan is suspended
or after it is terminated.
11.
<PAGE>
(b) Rights and obligations under any Option granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the written consent of the person to whom the Option was granted.
13. Effective Date of Plan.
The Plan shall become effective as determined by the Board, but no Options
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.
12.
<PAGE>
SERVICE METRICS, INC.
STOCK OPTION GRANT NOTICE
(1998 Stock Option Plan)
Service Metrics, Inc. (the "Company"), pursuant to its 1998 Stock Option Plan
(the "Plan"), hereby grants to Optionee an option to purchase the number of
shares of the Company's common stock set forth below. This option is subject to
all of the terms and conditions as set forth herein and in Attachments I, II,
and III, which are incorporated herein in their entirety.
Optionee: ____________________________
Date of Grant: ____________________________
Vesting Commencement Date: ____________________________
Shares Subject to Option: ____________________________
Exercise Price Per Share: $___________________________
Expiration Date: ____________________________
______ Incentive Stock Option
______ Nonstatutory Stock Option
Vesting Schedule: 25% vested on the one year anniversary of the Vesting
Commencement Date, with the remaining 75% vesting
monthly thereafter over 36 months.
Payment: By cash or check.
Additional Terms/Acknowledgements: The undersigned Optionee acknowledges
receipt of, and understands and agrees to, this Grant Notice, the Stock Option
Agreement and the Plan. Optionee further acknowledges that as of the Date of
Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth the
entire understanding between Optionee and the Company regarding the acquisition
of stock in the Company and supersede all prior oral and written agreements on
that subject with the exception of (i) options previously granted and delivered
to Optionee under the Plan, and (ii) the following agreements only:
Other Agreements: _________________________________________________________
_________________________________________________________
_________________________________________________________
SERVICE METRICS, INC.
By: _____________________________________ ________________________
Thomas K. Higley, President & CEO Signature
Date: ____________________________________ Date:___________________
Attachment I: Stock Option Agreement
Attachment II: 1998 Stock Option Plan
Attachment III: Notice of Exercise
<PAGE>
SERVICE METRICS, INC.
EMPLOYEE STOCK OPTION AGREEMENT
Pursuant to the Grant Notice and this Stock Option Agreement, the Company
has granted you an option to purchase the number of shares of the Company's
common stock ("Common Stock") indicated in the Grant Notice at the exercise
price indicated in the Grant Notice.
Your option is granted in connection with and in furtherance of the
Company's compensatory benefit plan for the Company's employees (including
officers), directors or consultants, and is intended to comply with the
provisions of Rule 701 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"). Defined
terms not explicitly defined in this Stock Option Agreement but defined in the
1998 Stock Option Plan (the "Plan") shall have the same definitions as in the
Plan.
The details of your option are as follows:
1. Vesting. Subject to the limitations contained herein, your option will
vest as provided in the Grant Notice, provided that vesting will cease upon the
termination of your Continuous Service.
2. Method Of Payment. Payment of the exercise price by cash or check is
due in full upon exercise of all or any part of your option, provided that you
may elect, to the extent permitted by applicable law and the Grant Notice, to
make payment of the exercise price under one of the following alternatives:
(a) Payment pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board which, prior to the issuance of Common
Stock, results in either the receipt of cash (or check) by the Company or the
receipt of irrevocable instructions to pay the aggregate exercise price to the
Company from the sales proceeds; and
(b) Provided that at the time of exercise the Company's Common Stock
is publicly traded and quoted regularly in the Wall Street Journal, payment by
delivery of already-owned shares of Common Stock, held for the period required
to avoid a charge to the Company's reported earnings, and owned free and clear
of any liens, claims, encumbrances or security interests, which Common Stock
shall be valued at its fair market value on the date of exercise.
3. Exercise Prior To Vesting. If permitted in the Grant Notice, and
subject to the provisions of your option contained herein, you may elect, at any
time that is both (i) during your Continuous Service and (ii) during your
-----
option's term, to exercise all or part of your option, including the nonvested
portion of your option; provided, however, that:
(a) a partial exercise of your option shall be deemed to cover first
vested shares and then the earliest vesting installment of unvested shares;
(b) any shares so purchased from installments which have not vested
as of the date of exercise shall be subject to the purchase option in favor of
the Company as described in the Company's form of Early Exercise Stock Purchase
Agreement;
1.
<PAGE>
(c) you shall enter into the Company's form of Early Exercise Stock
Purchase Agreement with a vesting schedule that will result in the same vesting
as if no early exercise had occurred; and
(d) your option shall not be exercisable with respect to any unvested
installment to the extent such exercise would cause the aggregate fair market
value of any shares subject to incentive stock options granted you by the
Company (valued as of their grant date) which would become exercisable for the
first time during any calendar year to exceed $100,000.
4. Whole Shares. Your option may only be exercised for whole shares.
5. Securities Law Compliance. Notwithstanding anything to the contrary
contained herein, your option may not be exercised unless the shares issuable
upon exercise of your option are then registered under the Securities Act or, if
such shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Securities Act.
6. Term. The term of your option commences on the date of grant and
expires upon the earliest of:
(i) the Expiration Date indicated in the Grant Notice;
(ii) the tenth (10th) anniversary of the Date of Grant;
(iii) twelve (12) months after your death, if you die during, or
within three (3) months after the termination of your Continuous Service; or
(iv) twelve (12) months after the termination of your
Continuous Service due to disability; or
(v) three (3) months after the termination of your Continuous
Service for any other reason, provided that if: (a) during any part of such
three (3) month period the option is not exercisable solely because of the
condition set forth in paragraph 5 (Securities Law Compliance), in which event
the option shall not expire until the earlier of the Expiration Date or until it
shall have been exercisable for an aggregate period of three (3) months after
the termination of Continuous Service, and (b) exercise of the option within
three (3) months after termination of your Continuous Service would result in
liability under section 16(b) of the Securities Exchange Act of 1934 (the
"Exchange Act"), the option will expire on the earliest of (i) the Expiration
Date, (ii) the tenth (10th) day after the last date upon which exercise would
result in such liability or (iii) six (6) months and ten (10) days after the
termination of your Continuous Service.
To obtain the federal income tax advantages associated with an
"incentive stock option," the Code requires that at all times beginning on the
date of grant of the option and ending on the day three (3) months before the
date of the option's exercise, you must be an employee of the Company or an
Affiliate of the Company, except in the event of your death or permanent and
total disability. The Company has provided for continued vesting or extended
2.
<PAGE>
exercisability of your option under certain circumstances for your benefit, but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you provide services to the Company or an Affiliate of the
Company as a consultant or if you exercise your option more than three (3)
months after the date your employment with the Company terminates.
7. Exercise.
(a) You may exercise the vested portion of your option during its
term (and the unvested portion of your option if the Grant Notice so permits) by
delivering a notice of exercise (in a form designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require.
(b) By exercising your option you agree that:
(i) as a condition to any exercise of your option, the Company
may require you to enter an arrangement providing for the payment by you to the
Company of any tax withholding obligation of the Company arising by reason of
(1) the exercise of your option; (2) the lapse of any substantial risk of
forfeiture to which the shares are subject at the time of exercise; or (3) the
disposition of shares acquired upon such exercise;
(ii) you will notify the Company in writing within fifteen (15)
days after the date of any disposition of any of the shares of the Common Stock
issued upon exercise of an incentive stock option that occurs within two (2)
years after the date of your option grant or within one (1) year after such
shares of Common Stock are transferred upon exercise of your option; and
(iii) the Company (or a representative of the underwriters) may,
in connection with the first underwritten registration of the offering of any
securities of the Company under the Act, require that you not sell, dispose of,
transfer, make any short sale of, grant any option for the purchase of, or enter
into any hedging or similar transaction with the same economic effect as a sale,
any shares of Common Stock or other securities of the Company held by you, for a
period of time specified by the underwriter(s) (not to exceed one hundred eighty
(180) days) following the effective date of the registration statement of the
Company filed under the Act. You further agree to execute and deliver such other
agreements as may be reasonably requested by the Company and/or the
underwriter(s) which are consistent with the foregoing or which are necessary to
give further effect thereto. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to your Common Stock
until the end of such period.
8. Transferability. Your option is not transferable, except by will or by
the laws of descent and distribution, and is exercisable during your life only
by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.
3.
<PAGE>
9. Acceleration of Option. In the event of an Acquisition (as defined in
the Plan), then (i) any surviving or acquiring corporation shall assume your
option or shall substitute similar options (including an option to acquire the
same consideration paid to the stockholders in the Acquisition) for your option
or (ii) in the event any surviving or acquiring corporation refuses to continue
or assume your option, or to substitute similar options for your option, then
the vesting of your option and the time during which such option may be
exercised shall be accelerated prior to such event and your option terminated if
not exercised after such acceleration and prior to such Acquisition. In the
event that any surviving or acquiring corporation assumes your option or
substitutes a similar option in connection with an Acquisition and you are
either not offered employment by the surviving or acquiring corporation (which
employment shall not result in any reduction in your salary or aggregate
benefits in effect at the time of the Acquisition) or you are terminated for any
reason other than for Cause (as defined herein) by such surviving or acquiring
corporation within six (6) months of the effective date of the Acquisition, the
vesting of your option and the time during which such option may be exercised
shall be accelerated immediately prior to such termination, such that that
number of option shares shall become fully vested as would have vested during
the six (6) month period following the later of (i) the effective date of the
Acquisition and (ii) the date of your termination. Notwithstanding the
provisions of Section 12 herein, the terms of this Section 9 shall supersede in
their entirety any contrary provision contained in the Plan.
As used herein, "Cause" shall mean (i) conviction of any felony or any
crime involving moral turpitude or dishonesty; (ii) participation in a fraud or
act of dishonesty against the Company; (iii) willful and material breach of any
Company policies that may be implemented after the effective date of this Stock
Option Agreement; (iv) intentional damage to the Company's property; (v)
material breach of your Proprietary Information and Inventions Agreement; or
(vi) your willful misfeasance or nonfeasance of duty that materially injures the
reputation, business or business relationships of the Company. Physical or
mental disability shall not constitute "cause".
10. Option Not a Service Contract. Your option is not an employment
contract and nothing in your option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company,
or of the Company to continue your employment with the Company. In addition,
nothing in your option shall obligate the Company, or any Affiliate of the
Company, or their respective stockholders, Board of Directors, officers or
employees to continue any relationship which you might have as a Director or
Consultant for the Company.
11. Notices. Any notices provided for in your option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by the Company to you, five (5) days after deposit in
the United States mail, postage prepaid, addressed to you at the last address
you provided to the Company.
12. Governing Plan Document. Your option is subject to all the provisions
of the Plan, the provisions of which are hereby made a part of your option,
including without limitation the provisions of the Plan relating to option
provisions, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated
4.
<PAGE>
and adopted pursuant to the Plan. In the event of any conflict between the
provisions of your option and those of the Plan, the provisions of the Plan
shall control.
5.
<PAGE>
SERVICE METRICS, INC.
NON-EMPLOYEE STOCK OPTION AGREEMENT
Pursuant to the Grant Notice and this Stock Option Agreement, the Company
has granted you an option to purchase the number of shares of the Company's
common stock ("Common Stock") indicated in the Grant Notice at the exercise
price indicated in the Grant Notice.
Your option is granted in connection with and in furtherance of the
Company's compensatory benefit plan for the Company's employees (including
officers), directors or consultants, and is intended to comply with the
provisions of Rule 701 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"). Defined
terms not explicitly defined in this Stock Option Agreement but defined in the
1998 Stock Option Plan (the "Plan") shall have the same definitions as in the
Plan.
The details of your option are as follows:
1. Vesting. Subject to the limitations contained herein, your
option will vest as provided in the Grant Notice, provided that vesting will
cease upon the termination of your Continuous Service.
2. Method Of Payment. Payment of the exercise price by cash or
check is due in full upon exercise of all or any part of your option, provided
that you may elect, to the extent permitted by applicable law and the Grant
Notice, to make payment of the exercise price under one of the following
alternatives:
(a) Payment pursuant to a program developed under Regulation T
as promulgated by the Federal Reserve Board which, prior to the issuance of
Common Stock, results in either the receipt of cash (or check) by the Company or
the receipt of irrevocable instructions to pay the aggregate exercise price to
the Company from the sales proceeds; and
(b) Provided that at the time of exercise the Company's Common
Stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of already-owned shares of Common Stock, held for the period
required to avoid a charge to the Company's reported earnings, and owned free
and clear of any liens, claims, encumbrances or security interests, which Common
Stock shall be valued at its fair market value on the date of exercise.
3. Exercise Prior To Vesting. If permitted in the Grant Notice, and
subject to the provisions of your option contained herein, you may elect, at any
time that is both (i) during your Continuous Service and (ii) during your
----
option's term, to exercise all or part of your option, including the nonvested
portion of your option; provided, however, that:
(a) a partial exercise of your option shall be deemed to cover
first vested shares and then the earliest vesting installment of unvested
shares;
(b) any shares so purchased from installments which have not
vested as of the date of exercise shall be subject to the purchase option in
favor of the Company as described in the Company's form of Early Exercise Stock
Purchase Agreement;
1.
<PAGE>
(c) you shall enter into the Company's form of Early Exercise Stock
Purchase Agreement with a vesting schedule that will result in the same vesting
as if no early exercise had occurred; and
(d) your option shall not be exercisable with respect to any
unvested installment to the extent such exercise would cause the aggregate fair
market value of any shares subject to incentive stock options granted you by the
Company (valued as of their grant date) which would become exercisable for the
first time during any calendar year to exceed $100,000.
4. Whole Shares. Your option may only be exercised for whole shares.
5. Securities Law Compliance. Notwithstanding anything to the contrary
contained herein, your option may not be exercised unless the shares issuable
upon exercise of your option are then registered under the Securities Act or, if
such shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Securities Act.
6. Term. The term of your option commences on the date of grant and
expires upon the earliest of:
(i) the Expiration Date indicated in the Grant Notice;
(ii) the tenth (10th) anniversary of the Date of Grant;
(iii) twelve (12) months after your death, if you die during, or
within three (3) months after the termination of your Continuous Service; or
(iv) twelve (12) months after the termination of your Continuous
Service due to disability; or
(v) three (3) months after the termination of your Continuous
Service for any other reason, provided that if: (a) during any part of such
three (3) month period the option is not exercisable solely because of the
condition set forth in paragraph 5 (Securities Law Compliance), in which event
the option shall not expire until the earlier of the Expiration Date or until it
shall have been exercisable for an aggregate period of three (3) months after
the termination of Continuous Service, and (b) exercise of the option within
three (3) months after termination of your Continuous Service would result in
liability under section 16(b) of the Securities Exchange Act of 1934 (the
"Exchange Act"), the option will expire on the earliest of (i) the Expiration
Date, (ii) the tenth (10th) day after the last date upon which exercise would
result in such liability or (iii) six (6) months and ten (10) days after the
termination of your Continuous Service.
To obtain the federal income tax advantages associated with an
"incentive stock option," the Code requires that at all times beginning on the
date of grant of the option and ending on the day three (3) months before the
date of the option's exercise, you must be an employee of the Company or an
Affiliate of the Company, except in the event of your death or permanent and
total disability. The Company has provided for continued vesting or extended
2.
<PAGE>
exercisability of your option under certain circumstances for your benefit, but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you provide services to the Company or an Affiliate of the
Company as a consultant or if you exercise your option more than three (3)
months after the date your employment with the Company terminates.
7. Exercise.
(a) You may exercise the vested portion of your option during its
term (and the unvested portion of your option if the Grant Notice so permits) by
delivering a notice of exercise (in a form designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require.
(b) By exercising your option you agree that:
(i) as a condition to any exercise of your option, the Company
may require you to enter an arrangement providing for the payment by you to the
Company of any tax withholding obligation of the Company arising by reason of
(1) the exercise of your option; (2) the lapse of any substantial risk of
forfeiture to which the shares are subject at the time of exercise; or (3) the
disposition of shares acquired upon such exercise;
(ii) you will notify the Company in writing within fifteen (15)
days after the date of any disposition of any of the shares of the Common Stock
issued upon exercise of an incentive stock option that occurs within two (2)
years after the date of your option grant or within one (1) year after such
shares of Common Stock are transferred upon exercise of your option; and
(iii) the Company (or a representative of the underwriters) may,
in connection with the first underwritten registration of the offering of any
securities of the Company under the Act, require that you not sell, dispose of,
transfer, make any short sale of, grant any option for the purchase of, or enter
into any hedging or similar transaction with the same economic effect as a sale,
any shares of Common Stock or other securities of the Company held by you, for a
period of time specified by the underwriter(s) (not to exceed one hundred eighty
(180) days) following the effective date of the registration statement of the
Company filed under the Act. You further agree to execute and deliver such
other agreements as may be reasonably requested by the Company and/or the
underwriter(s) which are consistent with the foregoing or which are necessary to
give further effect thereto. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to your Common Stock
until the end of such period.
8. Transferability. Your option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.
3.
<PAGE>
9. Option Not a Service Contract. Your option is not an employment
contract and nothing in your option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company,
or of the Company to continue your employment with the Company. In addition,
nothing in your option shall obligate the Company, or any Affiliate of the
Company, or their respective stockholders, Board of Directors, officers or
employees to continue any relationship which you might have as a Director or
Consultant for the Company.
10. Notices. Any notices provided for in your option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by the Company to you, five (5) days after deposit in
the United States mail, postage prepaid, addressed to you at the last address
you provided to the Company.
11. Governing Plan Document. Your option is subject to all the provisions
of the Plan, the provisions of which are hereby made a part of your option,
including without limitation the provisions of the Plan relating to option
provisions, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to
the Plan. In the event of any conflict between the provisions of your option
and those of the Plan, the provisions of the Plan shall control.
4.
<PAGE>
Service Metrics, Inc.
Notice of Exercise
1998 Stock Option Plan
Service Metrics, Inc.
4900 Nautilus Court, Suite 200
Boulder, CO 80301
Date of Exercise: ______________
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below.
Type of option (check one): Incentive [_] Nonstatutory [_]
Stock option dated: ________________
Number of shares as to
which option is exercised: ________________
Certificates to be
issued in name of: ________________
Total exercise price: $_______________
Cash payment delivered
herewith: $_______________
By this exercise, I agree (i) to provide such additional documents as you
may require pursuant to the terms of the Company's 1998 Stock Option Plan, (ii)
to provide for the payment by me to you (in the manner designated by you) of
your withholding obligation, if any, relating to the exercise of the Option, and
(iii) to the extent the Option is an incentive stock option, to notify you in
writing within fifteen (15) days after the date of any disposition of any of the
shares of Common Stock issued upon exercise of this Option that occurs within
two (2) years after the date of grant of the Option or within one (1) year after
--
such shares of Common Stock are issued upon exercise of the Option.
I hereby make the following certifications and representations with respect
to the number of shares of Common Stock (the "Shares"), which are being acquired
by me for my own account upon exercise of the Option as set forth above:
I acknowledge that the Shares have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), and are deemed to constitute
"restricted securities" under
<PAGE>
Rule 701 and Rule 144 promulgated under the Securities Act. I warrant and
represent to the Company that I have no present intention of distributing or
selling said Shares, except as permitted under the Securities Act and any
applicable state securities laws.
I further acknowledge that the Shares are subject to an assignable right of
first refusal in favor of the Company contained in the Company's Bylaws.
I further acknowledge that I will not be able to resell the Shares for at
least ninety (90) days after the stock of the Company becomes publicly traded
(i.e., subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended) under Rule 701 and that more
restrictive conditions apply to affiliates of the Company under Rule 144.
I further acknowledge that all certificates representing any of the Shares
subject to the provisions of the Option shall have endorsed thereon appropriate
legends reflecting the foregoing limitations, as well as any legends reflecting
restrictions pursuant to the Company's Articles of Incorporation, Bylaws and/or
applicable securities laws.
I further agree that, if required by the Company (or a representative of
the underwriters) in connection with the first underwritten registration of the
offering of any securities of the Company under the Securities Act, I will not
sell, dispose, transfer, make any short sale of, grant any option for the
purchase of, or enter into any hedging or similar transaction with the same
economic effect as a sale, of any shares of Common Stock or other securities of
the Company held by me, for a period of time specified by the underwriter(s)
(not to exceed one hundred eighty (180) days) following the effective date of
the registration statement of the Company filed under the Securities Act. I
further agree to execute and deliver such other agreements as may be reasonably
requested by the Company and/or the underwriter(s) which are consistent with the
foregoing or which are necessary to give further effect thereto. In order to
enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to my shares until the end of such period.
Very truly yours,
________________________________________
<PAGE>
Exhibit 5.01
[Letterhead of Fenwick & West LLP]
December 14, 1999
Exodus Communications, Inc.
2831 Mission College Boulevard
Santa Clara, CA 95054
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-8
(the "Registration Statement") to be filed by you with the Securities and
Exchange Commission (the "Commission") on or about December 14, 1999 in
connection with the registration under the Securities Act of 1933, as amended,
of an aggregate of 376,331 shares of your Common Stock (the "Stock"), subject to
issuance by you upon the exercise of outstanding stock options of Service
Metrics, Inc. ("SMI") under its 1998 Stock Option Plan (the "SMI Plan") that
have been assumed by you (the "Assumed Options"), pursuant to the Agreement and
Plan of Reorganization dated as of October 26, 1999, as amended (the
"Reorganization Agreement"), among you, SMI and Sweet Acquisition Corp., a
Delaware corporation and your wholly-owned subsidiary. In rendering this
opinion, we have examined the following:
(1) the Registration Statement, together with the exhibits filed as a part
thereof, including your restated certificate of incorporation and
bylaws and the SMI Plan and related forms of stock option grant
notice, employee stock option agreement, non-employee stock option
agreement and notice of exercise;
(2) the prospectus prepared in connection with the Registration Statement;
(3) copies provided to us of the minutes of meetings and actions by
written consent of the stockholders and Board of Directors that are
contained in your minute books and the minute books of your
predecessor, Exodus Communications, Inc., a California corporation,
which are maintained by you;
(4) a certificate from your transfer agent dated December 14, 1999
regarding the number of shares outstanding, and a list prepared by you
identifying all outstanding options, warrants and other rights to
acquire your capital stock;
(5) the Reorganization Agreement; and
(6) a Management Certificate addressed to us and dated of even date
herewith executed by you containing certain factual and other
representations.
We have also confirmed the continued effectiveness of your registration on
Form 8-A filed on February 13, 1998 under the Securities Exchange Act of 1934,
as amended, by telephone call to the offices of the Commission and have
confirmed your eligibility to use Form S-8.
<PAGE>
Exodus Communications, Inc.
December 14, 1999
Page 2
In our examination of documents for purposes of this opinion, we have
assumed, and express no opinion as to, the genuineness of all signatures on
original documents, the authenticity and completeness of all documents submitted
to us as originals or copies of originals, the conformity to originals and
completeness of all documents submitted to us as copies, the legal capacity of
all natural persons executing the same, the lack of any undisclosed termination,
modification, waiver or amendment to any documents reviewed by us and the due
authorization, execution and delivery of all documents where due authorization,
execution and delivery are prerequisites to the effectiveness thereof.
As to matters of fact relevant to this opinion, we have relied solely upon
our examination of the documents referred to above and have assumed the current
accuracy and completeness of the information obtained from records referred to
above. We have made no independent investigation or other attempt to verify the
accuracy of any of such information or to determine the existence or non-
existence of any other factual matters; however, we are not aware of any facts
-------
that would cause us to believe that the opinion expressed herein is not
accurate.
We are admitted to practice law in the State of California, and we express
no opinion herein with respect to the application or effect of the laws of any
jurisdiction other than the existing laws of the State of California and the
existing Delaware General Corporation Law.
In connection with our opinion expressed below, we have assumed that, at or
prior to the time of the delivery of any shares of Stock, the Registration
Statement will have become effective under the Securities Act of 1933, as
amended, that the registration will apply to such shares of Stock and will not
have been modified or rescinded and that there will not have occurred any change
in law affecting the validity or enforceability of such shares of Stock.
Our opinion herein is given on the assumption that you will, at all times
in the future, reserve a sufficient number of authorized and unissued shares of
Common Stock for issuance upon exercise of the Assumed Options, after taking
into account other securities issued or reserved by you.
Based upon the foregoing, it is our opinion that the 376,331 shares of
Stock that may be issued and sold by you upon the exercise of the Assumed
Options, when issued and sold in accordance with the SMI Plan and the stock
option agreements entered into thereunder, and in the manner referred to in the
prospectus associated with the SMI Plan and the Registration Statement, will be
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 all references to us, if any, in the
Registration Statement, the prospectus constituting a part thereof and any
amendments thereto.
This opinion speaks only as of its date and we assume no obligation to
update this opinion should circumstances change after the date hereof.
Very truly yours,
/s/ FENWICK & WEST LLP
<PAGE>
Exhibit 23.02
CONSENT OF KPMG LLP, INDEPENDENT AUDITORS
The Board of Directors
Exodus Communications, Inc.:
We consent to the incorporation by reference in the registration statement
on Form S-8 dated on or about December 13, 1999 ("Registration Statement"),of
our report dated January 26, 1999, relating to the consolidated balance sheets
of Exodus Communications, Inc. and subsidiaries as of December 31, 1997 and
1998, and the related consolidated statements of operations, stockholders'
(deficit) equity, and cash flows for each of the years in the three-year period
ended December 31, 1998, and the related financial statement schedule, which
report appears in the December 31, 1998, annual report on Form 10-K of Exodus
Communications, Inc. We also consent to the incorporation by reference in the
Registration Statement of our report dated November 23, 1999, relating to the
supplemental consolidated balance sheets of Exodus Communications, Inc. as of
December 31, 1997 and 1998, and the related supplemental consolidated statements
of operations, stockholders' (deficit) equity, and cash flows for each of the
years in the three-year period ended December 31, 1998, and the related
financial statement schedule, which report appears in the current report on Form
8-K of Exodus Communications, Inc. dated November 29, 1999.
/s/ KPMG
Mountain View, California
December 13, 1999
<PAGE>
Exhibit 23.03
CONSENT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS
The Board of Directors
Exodus Communications, Inc.:
We consent to the incorporation by reference in this Registration Statement
of Exodus Communications, Inc. and subsidiaries on Form S-8, of our report dated
April 8, 1999 (April 21, 1999 as to Note 10) relating to the consolidated
financial statements of Cohesive Technology Solutions, Inc. as of December 31,
1997 and 1998 and for each of the three years in the period ended December 31,
1998, which report appears in the Amended Current Report on Form 8-K of Exodus
Communications, Inc. filed with the Securities and Exchange Commission on
October 12, 1999.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
December 13, 1999
