<PAGE> 1
As filed with the Securities and Exchange Commission on May 24, 2000
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
QUOKKA SPORTS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 94-3250045
(State of Incorporation) (I.R.S. Employer Identification No.)
</TABLE>
-------------------
525 BRANNAN STREET, GROUND FLOOR
SAN FRANCISCO, CA 94107
(Address of principal executive offices)
-------------------
THE ZONE NETWORK, INC.
1996 STOCK OPTION PLAN
(Full title of the plans)
-------------------
ALAN S. RAMADAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
525 BRANNAN STREET, GROUND FLOOR
SAN FRANCISCO, CA 94107
(415) 908-3800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------------
Copies to:
KENNETH L. GUERNSEY, ESQ.
COOLEY GODWARD LLP
ONE MARITIME PLAZA, 20TH FLOOR
SAN FRANCISCO, CA 94111
(415) 693-2000
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
Proposed Maximum Proposed Maximum
Title of Securities Amount to be Offering Aggregate Amount of
to be Registered Registered Price per Share(1) Offering Price(1) Registration Fee
- ----------------------- ----------------------- --------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
Common Stock, par 334,723 shares $0.06951 - $12.1646 $2,858,746.84 $754.71
value
$.0001 per share
====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee. The offering price per share and aggregate offering price are
based upon the weighted average exercise price for shares subject to options
previously granted under The Zone Network, Inc. 1996 Stock Option Plan, pursuant
to Rule 457(h) under the Securities Act of 1933, as amended.
<PAGE> 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Quokka Sports, Inc. (the "Company") with
the Securities and Exchange Commission are incorporated by reference into this
Registration Statement:
(a) The Company's latest annual report on Form 10-K filed pursuant to
Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or either (1) the Company's latest prospectus filed pursuant to
Rule 424(b) under the Securities Act of 1933, as amended (the "Act"), that
contains audited financial statements for the Company's latest fiscal year for
which such statements have been filed, or (2) the Company's effective
registration statement on Form 10 or 20-F filed under the Exchange Act
containing audited financial statements for the Company's latest fiscal year.
(b) All other reports filed pursuant to Sections 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the annual reports, the
prospectus or the registration statement referred to in (a) above.
(c) The description of the Company's Common Stock which is contained in a
registration statement filed under the Exchange Act, including any amendment or
report filed for the purpose of updating such description.
All reports and other documents subsequently filed by the Company 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 offered have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference herein and to be a part of this
registration statement from the date of the filing of such reports and
documents.
INTERESTS OF NAMED EXPERTS AND COUNSEL
The legality of the Common Stock offered hereby will be passed upon for
the Company by Cooley Godward LLP, San Francisco, California. As of the date of
this Registration Statement, an investment partnership affiliated with Cooley
Godward LLP owns 127,887 shares of the Company's Common Stock.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's certificate of incorporation, as amended, contains
provisions permitted under Delaware law relating to the liability of directors.
These provisions eliminate a director's personal liability for monetary damages
resulting from a breach of fiduciary duty, except in circumstances involving
wrongful acts, such as:
- any breach of the director's duty of loyalty;
- acts or omissions which involve a lack of good faith, intentional
misconduct or a knowing violation of the law;
- payment of dividends or approval of stock repurchases or redemptions
that are unlawful under Delaware law; or
- any transaction from which the director derives an improper personal
benefit.
These provisions do not limit or eliminate the Company's rights or any
stockholder's rights to seek non-monetary relief, such as an injunction or
rescission, in the event of a breach of director's fiduciary duty. These
provisions will not alter a director's liability under federal securities laws.
The Company's bylaws, as amended, require the Company to indemnify its
directors and executive officers to the fullest extent not prohibited by the
Delaware law. The Company may limit the extent of such indemnification by
individual contracts with its directors and executive officers. Further, the
Company may decline to indemnify any director or executive officer in connection
with any proceeding initiated by such person or any proceeding by such
1.
<PAGE> 3
person against the Company or its directors, officers, employees or other
agents, unless such indemnification is expressly required to be made by law or
the proceeding was authorized by our board of directors.
The Company has entered into indemnity agreements with each of its current
directors and certain of its executive officers to give such directors and
officers additional contractual assurances regarding the scope of the
indemnification set forth in our certificate of incorporation and bylaws and to
provide additional procedural protections. At present, there is no pending
litigation or proceeding involving a director, officer or employee of the
Company for which indemnification is sought, nor is the Company aware of any
threatened litigation that may result in claims for indemnification.
The Company has the power to indemnify its other officers, employees and
other agents, as permitted by Delaware law, but it is not required to do so. The
Company maintains directors' and officers' liability insurance.
EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
CONSULTANTS AND ADVISORS
Not applicable.
2.
<PAGE> 4
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
<S> <C>
5.1 Opinion of Cooley Godward LLP
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants
23.2 Consent of Cooley Godward LLP is contained in Exhibit 5.1 to this Registration
Statement
24.1 Power of Attorney is contained on the signature pages
99.1 The Zone Network 1996 Stock Option Plan and forms of grant thereunder
</TABLE>
UNDERTAKINGS
1. The undersigned registrant hereby undertakes:
(a) 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) (ss. 230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
(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 (a)(i) and (a)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the issuer pursuant to
section 13 or section 15(d) of the Exchange Act that are incorporated by
reference herein.
(b) 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 herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) 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.
2. 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
3.
<PAGE> 5
be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
3. 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 foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act 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, 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.
4.
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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 San Francisco, State of California, on May 18,
2000.
QUOKKA SPORTS, INC.
By: /s/ Les Schmidt
-------------------------------------
Les Schmidt
Executive Vice President, Chief Financial
Officer and Secretary
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Alan
Ramadan and Les Schmidt, and each or any one of them, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other 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 connection therewith, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done 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>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Alan S. Ramadan President, Chief Executive May 18, 2000
------------------------------ Officer and Director
(ALAN S. RAMADAN) (Principal Executive Officer)
/s/ Les Schmidt Executive Vice President, Chief May 18, 2000
------------------------------ Financial Officer and Secretary
(LES SCHMIDT) (Principal Financial and
Accounting Officer)
/s/ Richard H. Williams Director (Chairman of the Board May 18, 2000
------------------------------ of Directors)
(RICHARD H. WILLIAMS)
/s/ John Bertrand, A.M. Director (Vice-Chairman of the May 18, 2000
------------------------------ Board of Directors)
(JOHN BERTRAND A.M.)
</TABLE>
5.
<PAGE> 7
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Walter W. Bregman Director May 18, 2000
------------------------------
(WALTER W. BREGMAN)
Director ______, 2000
------------------------------
(ROEL PIEPER)
/s/ James G. Shennan, Jr. Director May 18, 2000
------------------------------
(JAMES G. SHENNAN, JR.)
/s/ Barry M. Weinman Director May 18, 2000
------------------------------
(BARRY M. WEINMAN)
</TABLE>
6.
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NUMBERS
<S> <C> <C>
5.1 Opinion of Cooley Godward LLP
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants
23.2 Consent of Cooley Godward LLP is contained in Exhibit 5.1 to
this Registration Statement
24.1 Power of Attorney is contained on the signature pages.
99.1 The Zone Network, Inc. 1996 Stock Option Plan and forms of
grant thereunder
</TABLE>
7.
<PAGE> 1
Exhibit 5.1
May 23, 2000
Quokka Sports, Inc.
525 Brannan Street, Ground Floor
San Francisco, CA 94107
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by Quokka Sports, Inc. (the "Company") of a Registration
Statement on Form S-8 (the "Registration Statement") with the Securities and
Exchange Commission covering the offering of up to 334,723 shares of the
Company's Common Stock, $.0001 par value, (the "Shares") pursuant to The Zone
Network, Inc. 1996 Stock Option Plan (the "Plan").
In connection with this opinion, we have examined the Registration Statement and
related Prospectus, your Certificate of Incorporation and Bylaws, as amended,
and such other documents, records, certificates, memoranda and other instruments
as we deem necessary as a basis for this opinion. We have assumed the
genuineness and authenticity of all documents submitted to us as originals, the
conformity to originals of all documents submitted to us as copies thereof, and
the due execution and delivery of all documents where due execution and delivery
are a prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when sold and issued in accordance with the Plan, the
Registration Statement and related Prospectus, will be validly issued, fully
paid, and nonassessable (except as to shares issued pursuant to certain deferred
payment arrangements, which will be fully paid and nonassessable when such
deferred payments are made in full).
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
Cooley Godward llp
By: /s/ Kenneth L. Guernsey
- -----------------------------------
Kenneth L. Guernsey
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated January 19, 2000 relating to the
consolidated financial statements, which appear in Quokka Sports, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1999.
/s/ PricewaterhouseCoopers LLP
San Francisco, California
May 18, 2000
<PAGE> 1
EXHIBIT 99.1
ZONENETWORK.COM, INC.
1996 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purpose of The Zone Network, Inc. 1996 Stock Option Plan (this
"Plan") is to provide a means whereby selected employees, directors, officers,
agents, consultants, advisors and independent contractors of The Zone Network,
Inc. (the "Company"), or of any parent or subsidiary (as defined in subsection
5.8 and referred to hereinafter as "related corporations") thereof, may be
granted incentive stock options and/or nonqualified stock options to purchase
the Common Stock (as defined in Section 3) of the Company, in order to attract
and retain the services or advice of such employees, directors, officers,
agents, consultants, advisors and independent contractors and to provide added
incentive to such persons by encouraging stock ownership in the Company.
SECTION 2. ADMINISTRATION
This Plan shall be administered by the Board of Directors of the Company
(the "Board") or, in the event the Board shall appoint and/or authorize a
committee to administer this Plan, by such committee. The administrator of this
Plan shall hereinafter be referred to as the "Plan Administrator."
In the event a member of the Plan Administrator may be eligible, subject
to the restrictions set forth in Section 4, to participate in this Plan, no
member of the Plan Administrator shall vote with respect to the granting of an
option hereunder to himself or herself, as the case may be, and, if state
corporate law does not permit a committee to grant options to directors, then
any option granted under this Plan to a director for his or her services as such
shall be approved by the full Board.
The members of any committee serving as Plan Administrator shall be
appointed by the Board for such term as the Board may determine. The Board may
from time to time remove members from, or add members to, the committee.
Vacancies on the committee, however caused, shall be filled by the Board.
With respect to grants made under this Plan to individuals who are
subject to Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Plan Administrator shall be constituted at all times so as
to meet the requirements of Rule 16b-3 promulgated under Section 16(b) of the
Exchange Act if any of the Company's equity securities are registered pursuant
to Section 12(b) or 12(g) of the Exchange Act.
2.1 PROCEDURES
The Board shall designate one of the members of the Plan Administrator
as chairman. The Plan Administrator may hold meetings at such times and places
as it shall determine. The acts of a majority of the members of the Plan
Administrator present at meetings at which a quorum exists, or acts reduced to
or approved in writing by all Plan Administrator members, shall be valid acts of
the Plan Administrator.
<PAGE> 2
2.2 RESPONSIBILITIES
Except for the terms and conditions explicitly set forth in this Plan,
the Plan Administrator shall have the authority, in its discretion, to determine
all matters relating to the options to be granted under this Plan, including
selection of the individuals to be granted options, the number of shares to be
subject to each option, the exercise price, and all other terms and conditions
of the options. Grants under this Plan need not be identical in any respect,
even when made simultaneously. The interpretation and construction by the Plan
Administrator of any terms or provisions of this Plan or any option issued
hereunder, or of any rule or regulation promulgated in connection herewith,
shall be conclusive and binding on all interested parties, so long as such
interpretation and construction with respect to incentive stock options
correspond to the requirements of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), the regulations thereunder and any amendments
thereto.
2.3 RULE 16b-3 COMPLIANCE AND BIFURCATION OF PLAN
It is the intention of the Company that, if any of the Company's equity
securities are registered pursuant to Section 12(b) or 12(g) of the Exchange
Act, this Plan shall comply in all respects with Rule 16b-3 under the Exchange
Act. If any Plan provision is later found not to be in compliance with such
Section, the provision shall be deemed null and void, and in all events this
Plan shall be construed in favor of its meeting the requirements of Rule 16b-3.
Notwithstanding anything in this Plan to the contrary, the Board, in its
absolute discretion, may bifurcate this Plan so as to restrict, limit or
condition the application of any provision of this Plan to participants who are
subject to Section 16 of the Exchange Act without so restricting, limiting or
conditioning this Plan with respect to other participants.
SECTION 3. SHARES SUBJECT TO THIS PLAN
The shares subject to this Plan shall be the Company's Common Stock par
value $.01 per share (the "Common Stock"), currently authorized but unissued or
subsequently acquired by the Company. Subject to adjustment as provided in
Section 7, the aggregate amount of Common Stock to be delivered upon the
exercise of all options granted under this Plan shall not exceed 650,000 shares
as such Common Stock was constituted on the effective date of this Plan. If any
option granted under this Plan shall expire or be surrendered, exchanged for
another option, canceled or terminated for any reason without having been
exercised in full, the unpurchased shares subject thereto shall thereupon again
be available for purposes of this Plan, including for replacement options which
may be granted in exchange for such expired, surrendered, exchanged, canceled or
terminated options.
SECTION 4. ELIGIBILITY
An incentive stock option may be granted only to an individual who, at
the time the option is granted, is an employee of the Company or a related
corporation. A nonqualified stock option may be granted to any employee,
director, officer, agent, consultant, advisor or independent contractor of the
Company or any related corporation, whether an individual or an entity. Any
party to whom an option is granted under this Plan shall be referred to
hereinafter as an "Optionee."
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<PAGE> 3
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
Options granted under this Plan shall be evidenced by written agreements
which shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and which are not inconsistent with this
Plan. Notwithstanding the foregoing, options shall include or incorporate by
reference the following terms and conditions:
5.1 NUMBER OF SHARES AND PRICE
The maximum number of shares that may be purchased pursuant to the
exercise of each option and the price per share at which such option is
exercisable (the "exercise price") shall be as established by the Plan
Administrator; provided that the Plan Administrator shall act in good faith to
establish an exercise price which shall be not less than the fair market value
per share of the Common Stock at the time the option is granted with respect to
incentive stock options and also provided that, with respect to incentive stock
options granted to greater than 10% shareholders, the exercise price shall be as
required by subsection 6.1.
5.2 TERM AND MATURITY
Subject to the restrictions contained in Section 6 with respect to
granting incentive stock options to greater than 10% shareholders, the term of
each incentive stock option shall be as established by the Plan Administrator
and, if not so established, shall be 10 years from the date it is granted but in
no event shall it exceed 10 years. The term of each nonqualified stock option
shall be as established by the Plan Administrator and, if not so established,
shall be 10 years. To ensure that the Company or a related corporation will
achieve the purpose and receive the benefits contemplated by this Plan, any
option granted to any Optionee hereunder shall, unless the condition of this
sentence is waived or modified in the agreement evidencing the option or by
resolution adopted at any time by the Plan Administrator, be exercisable
according to the following schedule:
<TABLE>
<CAPTION>
Period of Optionee's Continuous
Relationship With the Company or Related
Corporation From the Date the Option Is Portion of Total Option Which Is
Granted Exercisable
- ----------------------------------------- --------------------------------
<S> <C>
after one year: 33.3333%
after each three-month period completed an additional
thereafter: 8.3333%
5.3 EXERCISE
</TABLE>
Subject to the vesting schedule described in subsection 5.2, each option
may be exercised in whole or in part at any time and from time to time;
provided, however, that no fewer than 100 shares (or the remaining shares then
purchasable under the option, if less than 100 shares) may be purchased upon any
exercise of option hereunder and that only whole shares will be issued pursuant
to the exercise of any option. An Option shall be exercised by delivery to the
Company of notice of
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<PAGE> 4
the number of shares with respect to which the option is exercised, together
with payment of the exercise price.
5.4 PAYMENT OF EXERCISE PRICE
To the extent permitted by the Plan Administrator and applicable laws
and regulations (including, but not limited to, federal tax and securities laws
and regulations and state corporate law), an option may be exercised by:
(a) Payment of the option exercise price shall be made in full at the
time the notice of exercise of the option is delivered to the Company and shall
be in cash, bank certified or cashier's check, or personal check (unless at the
time of exercise the Plan Administrator in a particular case determines not to
accept a personal check) for the shares being purchased; or
(b) delivery of shares of Common Stock of the Company held by an
Optionee having a fair market value equal to the exercise price, such fair
market value to be determined in good faith by the Plan Administrator; provided,
however, that payment in stock held by an Optionee shall not be made unless the
stock shall have been owned by the Optionee for a period of at least six months.
The Plan Administrator in its sole discretion can determine at any time
before exercise that additional forms of payment will be permitted. To the
extent permitted by the Plan Administrator and applicable laws and regulations
(including, but not limited to, federal tax and securities laws and regulations
and state corporate law), an option may be exercised by delivery of a
full-recourse promissory note executed by the Optionee; provided that (i) such
note delivered in connection with an incentive stock option shall, and such note
delivered in connection with a nonqualified stock option may, in the sole
discretion of the Plan Administrator, bear interest at a rate specified by the
Plan Administrator but in no case less than the rate required to avoid
imputation of interest (taking into account any exceptions to the imputed
interest rules) for federal income tax purposes, (ii) the Plan Administrator in
its sole discretion shall specify the term and other provisions of such note at
the time an incentive stock option is granted or at any time prior to exercise
of a nonqualified stock option, and (iii) the Optionee shall pledge to the
Company for the purpose of securing the payment of such note the shares of
Common Stock to be issued to the Optionee upon exercise of the option and the
certificate representing such shares shall be held in escrow in order to perfect
the Company's security interest.
5.5 WITHHOLDING TAX REQUIREMENT
The Company or any related corporation shall have the right to retain
and withhold from any payment of cash or shares of Common Stock under this Plan
the amount of taxes required by any government to be withheld or otherwise
deducted and paid with respect to such payment. At its discretion, the Company
may require an Optionee receiving shares of Common Stock to reimburse the
Company for any such taxes required to be withheld by the Company and withhold
any distribution in whole or in part until the Company is so reimbursed. In lieu
thereof, the Company shall have the right to withhold from any other cash
amounts due or to become due from the Company to the Optionee an amount equal to
such taxes. The Company may also retain and withhold or the Optionee may elect,
subject to approval by the Company at its sole discretion, to
-4-
<PAGE> 5
have the Company retain and withhold a number of shares having a market value
not less than the amount of such taxes required to be withheld by the Company to
reimburse the Company for any such taxes and cancel (in whole or in part) any
such shares so withheld. In order to qualify such election for exemption under
Rule 16b-3 promulgated under Section 16(b) of the Exchange Act, any individual
who is subject to Section 16 under the Exchange Act must exercise the option
during the quarterly 10-day window period required under Section 16(b) of the
Exchange Act for exercises of stock appreciation rights, and the election
relating to such option exercise must be (i) an irrevocable election made six
months prior to the date the option exercise becomes taxable; (ii) an election
that is made during a window period; or (iii) an election that is made prior to
a window period, provided the election becomes effective as of the next window
period.
5.6 HOLDING PERIODS
5.6.1 TAXATION OF STOCK OPTIONS
In order to obtain certain tax benefits afforded to incentive stock
options under Section 422 of the Code, an Optionee must hold the shares issued
upon the exercise of an incentive stock option for two years after the date of
grant of the option and one year from the date of exercise. An Optionee may be
subject to the alternative minimum tax at the time of exercise of an incentive
stock option.
The Plan Administrator may require an Optionee to give the Company
prompt notice of any disposition of shares acquired by the exercise of an
incentive stock option prior to the expiration of such holding periods.
Tax advice should be obtained by an Optionee when exercising any option
and prior to the disposition of the shares issued upon the exercise of any
option.
5.7 TRANSFERABILITY OF OPTIONS
Options granted under this Plan and the rights and privileges conferred
hereby may not be transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise) other than by will or by the
applicable laws of descent and distribution and shall not be subject to
execution, attachment or similar process. During an Optionee's lifetime, any
options granted under this Plan are personal to him or her and are exercisable
solely by such Optionee. Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of any option under this Plan or of any right or privilege
conferred hereby, contrary to the Code or to the provisions of this Plan, or the
sale or levy or any attachment or similar process upon the rights and privileges
conferred hereby shall be null and void. Notwithstanding the foregoing, to the
extent permitted by Rule 16b-3 under the Exchange Act and other applicable law
and regulation, the Plan Administrator may permit an Optionee to (i) during the
Optionee's lifetime, designate a person who may exercise the option after the
Optionee's death by giving written notice of such designation to the Company
(such designation may be changed from time to time by the Optionee by giving
written notice to the Company revoking any earlier designation and making a new
designation) or (ii) with respect to nonqualified stock options, transfer the
option and the rights and privileges conferred hereby.
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<PAGE> 6
5.8 TERMINATION OF RELATIONSHIP
If the Optionee's relationship with the Company or any related
corporation ceases for any reason other than termination for cause, death or
total disability, and unless by its terms the option sooner terminates or
expires, then the Optionee may exercise, for a three-month period, that portion
of the Optionee's option which is exercisable at the time of such cessation, but
the Optionee's option shall terminate at the end of such period following such
cessation as to all shares for which it has not theretofore been exercised,
unless such provision is waived in the agreement evidencing the option. If, in
the case of an incentive stock option, an Optionee's relationship with the
Company or any related corporation changes (i.e., from employee to nonemployee,
such as a consultant), such change shall constitute a termination of an
Optionee's employment with the Company or any related corporation and the
Optionee's incentive stock option shall terminate in accordance with this
subsection 5.8. Upon the expiration of the three-month period following
cessation of employment in the case of an incentive stock option, or at any time
prior to the expiration of the option in the case of a nonqualified stock
option, the Plan Administrator shall have sole discretion in a particular
circumstance to extend the exercise period following such cessation to any date
up to the termination or expiration of the option. If, however, in the case of
an incentive stock option, the Optionee does not exercise the Optionee's option
within three months after cessation of employment, the option will no longer
qualify as an incentive stock option under the Code.
If an Optionee is terminated for cause, each option granted hereunder
shall automatically terminate as of the first discovery by the Company of any
reason for termination for cause, and such Optionee shall thereupon have no
right to purchase any shares pursuant to such option. "Termination for cause"
shall mean dismissal for dishonesty, conviction or confession of a crime (except
minor violations), fraud, misconduct or disclosure of confidential information.
If an Optionee's relationship with the Company or any related corporation is
suspended pending an investigation of whether or not the Optionee shall be
terminated for cause, the Optionee's rights under each option granted hereunder
likewise shall be suspended during the period of investigation.
If an Optionee's relationship with the Company or any related
corporation ceases because of a total disability, the Optionee's option shall
not terminate or, in the case of an incentive stock option, cease to be treated
as an incentive stock option until the end of the 12-month period following such
cessation (unless by its terms it sooner terminates or expires). As used in this
Plan, the term "total disability" refers to a mental or physical impairment of
the Optionee which is expected to result in death or which has lasted or is
expected to last for a continuous period of 12 months or more and which causes
the Optionee to be unable, in the opinion of the Company and two independent
physicians, to perform his or her duties for the Company and to be engaged in
any substantial gainful activity. Total disability shall be deemed to have
occurred on the first day after the Company and the two independent physicians
have furnished their opinion of total disability to the Plan Administrator.
Options granted under the Plan shall not be affected by any change of
relationship with the Company so long as the Optionee continues to be an
employee, director, officer, agent, consultant, advisor or independent
contractor of the Company or of a related corporation; however, a change in an
Optionee's status from an employee to a nonemployee (e.g., consultant or
independent contractor) shall result in the termination of an outstanding
incentive stock option held by such Optionee.
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<PAGE> 7
The Plan Administrator, in its absolute discretion, may determine all questions
of whether particular leaves of absence constitute a termination of services;
provided, however, that with respect to incentive stock options, such
determination shall be subject to any requirements contained in the Code. The
foregoing notwithstanding, with respect to incentive stock options, employment
shall not be deemed to continue beyond the first 90 days of such leave, unless
the Optionee's reemployment rights are guaranteed by statute or by contract.
As used herein, the term "related corporation," when referring to a
subsidiary corporation, shall mean any corporation (other than the Company) in,
at the time of the granting of the option, an unbroken chain of corporations
ending with the Company, if stock possessing 50% or more of the total combined
voting power of all classes of stock of each of the corporations other than the
Company is owned by one of the other corporations in such chain. When referring
to a parent corporation, the term "related corporation" shall mean any
corporation in an unbroken chain of corporations ending with the Company if, at
the time of the granting of the option, each of the corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
5.9 DEATH OF OPTIONEE
If an Optionee dies while he or she has a relationship with the Company
or any related corporation or within the three-month period (or 12-month period
in the case of totally disabled Optionees) following cessation of such
relationship, any option held by such Optionee, to the extent that the Optionee
would have been entitled to exercise such option, may be exercised within one
year after his or her death by the personal representative of his or her estate
or by the person or persons to whom the Optionee's rights under the option shall
pass (i) by will or by the applicable laws of descent and distribution or (ii)
by a designation or transfer pursuant to Section 5.7.
5.10 NO STATUS AS SHAREHOLDER
Neither the Optionee nor any party to which the Optionee's rights and
privileges under the option may pass shall be, or have any of the rights or
privileges of, a shareholder of the Company with respect to any of the shares
issuable upon the exercise of any option granted under this Plan unless and
until such option has been exercised.
5.11 CONTINUATION OF RELATIONSHIP
Nothing in this Plan or in any option shall confer upon any Optionee any
right to continue in the employ or other relationship of the Company or of a
related corporation, or to interfere in any way with the right of the Company or
of any such related corporation to terminate his or her employment or other
relationship with the Company at any time.
5.12 MODIFICATION AND AMENDMENT OF OPTION
Subject to the requirements of Code Section 422 with respect to
incentive stock options and to the terms and conditions and within the
limitations of this Plan, the Plan Administrator may modify or amend any
outstanding option granted under this Plan. The modification or amendment of an
outstanding option shall not, without the consent of the Optionee, impair or
diminish any of his or
-7-
<PAGE> 8
her rights or any of the obligations of the Company under such option. Except as
otherwise provided in this Plan, no outstanding option shall be terminated
without the consent of the Optionee.
5.13 LIMITATION ON VALUE FOR INCENTIVE STOCK OPTIONS
As to all incentive stock options granted under the terms of this Plan,
to the extent that the aggregate fair market value of the shares (determined at
the time the incentive stock option is granted) with respect to which incentive
stock options are exercisable for the first time by the Optionee during any
calendar year (under this Plan and all other incentive stock option plans of the
Company, a related corporation or a predecessor corporation) exceeds $100,000,
such options shall be treated as nonqualified stock options. The previous
sentence shall not apply if the Internal Revenue Service issues a public rule,
issues a private ruling to the Company, any Optionee or any legatee, personal
representative or distributee of an Optionee or issues regulations changing or
eliminating such annual limit.
SECTION 6. GREATER THAN 10% SHAREHOLDERS
6.1 EXERCISE PRICE AND TERM OF INCENTIVE STOCK OPTIONS
If an incentive stock option is granted under this Plan to any employee
who owns more than 10% of the total combined voting power of all classes of
stock of the Company or any related corporation, the term of such incentive
stock options shall not exceed five years and the exercise price shall be not
less than 110% of the fair market value of the shares at the time the incentive
stock option is granted. This provision shall control notwithstanding any
contrary terms contained in an option agreement or any other document.
6.2 ATTRIBUTION RULE
For purposes of subsection 6.1, in determining stock ownership, an
employee shall be deemed to own the shares owned, directly or indirectly, by or
for his or her brothers, sisters, spouse, ancestors and lineal descendants.
Shares owned, directly or indirectly, by or for a corporation, partnership,
estate or trust shall be deemed to be owned proportionately by or for its
shareholders, partners or beneficiaries. If an employee or a person related to
the employee owns an unexercised option or warrant to purchase shares of the
Company, the shares subject to that portion of the option or warrant which is
unexercised shall not be counted in determining stock ownership. For purposes of
this Section 6, shares owned by an employee shall include all shares actually
issued and outstanding immediately before the grant of the incentive stock
option to the employee.
SECTION 7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
The aggregate number and class of shares for which options may be
granted under this Plan, the number and class of shares covered by each
outstanding option and the exercise price per share thereof (but not the total
price), and each such option, shall all be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock of the
Company resulting from a split-up or consolidation of shares or any like capital
adjustment, or the payment of any stock dividend.
-8-
<PAGE> 9
7.1 EFFECT OF LIQUIDATION OR REORGANIZATION
7.1.1 CASH, STOCK OR OTHER PROPERTY FOR STOCK
Except as provided in subsection 7.1.2, upon a merger (other than a
merger of the Company in which the holders of shares of Common Stock immediately
prior to the merger have the same proportionate ownership of shares of Common
Stock in the surviving corporation immediately after the merger), consolidation,
acquisition of property or stock, separation, reorganization (other than a mere
reincorporation or the creation of a holding company) or liquidation of the
Company, as a result of which the shareholders of the Company receive cash,
stock or other property in exchange for or in connection with their shares of
Common Stock, any option granted hereunder shall terminate, but the Optionee
shall have the right immediately prior to any such merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation to
exercise such Optionee's option in whole or in part, whether or not the vesting
requirements set forth in the option agreement have been satisfied.
7.1.2 CONVERSION OF OPTIONS ON STOCK FOR STOCK EXCHANGE
If the shareholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their shares of Common Stock in
any transaction involving a merger (other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation
or reorganization (other than a mere reincorporation or the creation of a
holding company), all options granted hereunder shall be converted into options
to purchase shares of Exchange Stock unless the Company and the corporation
issuing the Exchange Stock, in their sole discretion, determine that any or all
such options granted hereunder shall not be converted into options to purchase
shares of Exchange Stock but instead shall terminate in accordance with the
provisions of subsection 7.1.1. The amount and price of converted options shall
be determined by adjusting the amount and price of the options granted hereunder
in the same proportion as used for determining the number of shares of Exchange
Stock the holders of the shares of Common Stock receive in such merger,
consolidation, acquisition of property or stock, separation or reorganization.
The converted options shall be fully vested whether or not the vesting
requirements set forth in the option agreement have been satisfied.
7.2 FRACTIONAL SHARES
In the event of any adjustment in the number of shares covered by any
option, any fractional shares resulting from such adjustment shall be
disregarded and each such option shall cover only the number of full shares
resulting from such adjustment.
7.3 DETERMINATION OF BOARD TO BE FINAL
All Section 7 adjustments shall be made by the Board, and its
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. Unless an Optionee agrees otherwise, any
change or adjustment to an incentive stock option shall be made in such a manner
so as not to constitute a "modification" as defined in Code Section 425(h) and
so as
-9-
<PAGE> 10
not to cause his or her incentive stock option issued hereunder to fail to
continue to qualify as an incentive stock option as defined in Code Section
422(b).
SECTION 8. SECURITIES REGULATION
Shares shall not be issued with respect to an option granted under this
Plan unless the exercise of such option and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, any applicable state securities laws, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance, including the
availability, if applicable, of an exemption from registration for the issuance
and sale of any shares hereunder. Inability of the Company to obtain, from any
regulatory body having jurisdiction, the authority deemed by the Company's
counsel to be necessary for the lawful issuance and sale of any shares hereunder
or the unavailability of an exemption from registration for the issuance and
sale of any shares hereunder shall relieve the Company of any liability in
respect of the nonissuance or sale of such shares as to which such requisite
authority shall not have been obtained.
As a condition to the exercise of an option, the Company may require the
Optionee to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present intention
to sell or distribute such shares if, in the opinion of counsel for the Company,
such a representation is required by any relevant provision of the
aforementioned laws. At the option of the Company, a stop-transfer order against
any shares of stock may be placed on the official stock books and records of the
Company, and a legend indicating that the stock may not be pledged, sold or
otherwise transferred, unless an opinion of counsel is provided (concurred in by
counsel for the Company) stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on stock certificates in order to
assure exemption from registration. The Plan Administrator may also require such
other action or agreement by the Optionees as may from time to time be necessary
to comply with the federal and state securities laws. THIS PROVISION SHALL NOT
OBLIGATE THE COMPANY TO UNDERTAKE REGISTRATION OF THE OPTIONS OR STOCK
HEREUNDER.
Should any of the Company's capital stock of the same class as the stock
subject to options granted hereunder be listed on a national securities
exchange, all stock issued hereunder if not previously listed on such exchange
shall be authorized by that exchange for listing thereon prior to the issuance
thereof.
SECTION 9. AMENDMENT AND TERMINATION
9.1 BOARD ACTION
The Board may at any time suspend, amend or terminate this Plan,
provided that, to the extent required for compliance with Rule 16b-3 promulgated
under Section 16(b) of the Exchange Act,
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<PAGE> 11
Section 422 of the Code or by any applicable law or regulation, the Company's
shareholders must approve any amendment which will:
(a) increase the number of shares that may be issued under this
Plan;
(b) with respect to nonqualified stock options, materially modify
the requirements as to eligibility for participation in this Plan or, with
respect to incentive stock options, change the designation of the participants
or class of participants eligible for participation in this Plan;
(c) materially increase the benefits accruing to the
participants under this Plan; or
(d) otherwise require shareholder approval under any applicable
law or regulation.
Such shareholder approval must be obtained (i) within 12 months of the
adoption by the Board of such amendment or (ii) if earlier, and to the extent
required for compliance with Rule 16b-3 promulgated under Section 16(b) of the
Exchange Act, at the next annual meeting of shareholders after such adoption by
the Board.
Any amendment made to this Plan which would constitute a "modification"
to incentive stock options outstanding on the date of such amendment, shall not
be applicable to such outstanding incentive stock options, but shall have
prospective effect only, unless the Optionee agrees otherwise.
9.2 AUTOMATIC TERMINATION
Unless sooner terminated by the Board, this Plan shall terminate ten
years from the earlier of (a) the date on which this Plan is adopted by the
Board or (b) the date on which this Plan is approved by the shareholders of the
Company. No option may be granted after such termination or during any
suspension of this Plan. The amendment or termination of this Plan shall not,
without the consent of the option holder, alter or impair any rights or
obligations under any option theretofore granted under this Plan.
SECTION 10. EFFECTIVENESS OF THIS PLAN
This Plan shall become effective upon adoption by the Board so long as
it is approved by the Company's shareholders at any time within 12 months of
such adoption of this Plan or, if earlier, and to the extent required for
compliance with Rule 16b-3 under the Exchange Act, at the next annual meeting of
shareholders after adoption by the Board.
******************
Plan adopted by the Board of Directors on January 2, 1996 and approved
by the shareholders on January 8, 1996. Amended by Shareholders Feb 12, 1997.
-11-
<PAGE> 12
ZONE NETWORK.COM, INC.
INCENTIVE STOCK OPTION LETTER AGREEMENT
TO: ___________________________ Date of Grant: ________20__
We are pleased to inform you that you have been selected by the Plan
Administrator of The Zone Network's (the "Company") 1996 Stock Option Plan (the
"Plan") to receive an incentive stock option for the purchase of __________
shares of the Company's Common Stock at an exercise price of $_______ per share.
A copy of the Plan is attached and incorporated into this Agreement by
reference.
The terms of the option are as set forth in the Plan and in this
Agreement. This Agreement is subject to and in accordance with the express terms
and conditions of the Plan and is in all respects limited by and subject to the
express terms and provisions of the Plan. The most important of the terms set
forth in the Plan are summarized as follows:
TERM: The term of the option is ten years from date of grant, unless
sooner terminated.
VESTING: The option shall vest and become exercisable according to the
following schedule:
Period of Optionee's Continuous
Relationship With the Company or
Related Corporation From the Date the Portion of Total Option
Option Is Granted Which Is Exercisable
after one year: 33.3333%
after each three-month period an additional
completed thereafter: 8.3333%
------------------------------------- -----------------------
ISO QUALIFICATION: To the extent that the aggregate fair market value of
the shares with respect to which the option is exercisable for the first time by
you during any calendar year (under this option and all other incentive stock
options you hold) exceeds $100,000, the excess portion will be treated as a
nonqualified stock option, unless the Internal Revenue Service changes the rules
and regulations governing the $100,000 limit for incentive stock options.
TERMINATION: The option will terminate immediately upon termination
for cause, as defined in the Plan, or three months after cessation of employment
with the
<PAGE> 13
Company or a related corporation, unless cessation is due to total disability,
in which case the option shall terminate 12 months after cessation of employment
EXERCISE: During your lifetime only you can exercise the option. The
Plan also provides for exercise of the option by the personal representative of
your estate or the beneficiary thereof following your death. You may use the
Notice of Exercise of Incentive Stock Option in the form attached to this
Agreement when you exercise the option.
The Plan Administrator may, in its sole discretion at the time of
exercise, determine that the exercise of this option is subject to your
execution of an agreement, in the form in use at the time of exercise, whereby
under certain circumstances, you grant to the Company a right of first offer to
purchase the shares acquired by you upon exercise of the option.
PAYMENT FOR SHARES: Unless the Plan Administrator at any time
determines otherwise, the option may be exercised by the delivery of:
(a) Cash, personal check, bank certified or cashier's check; or
(b) Shares of the capital stock of the Company held by you for a period
of at least six months having a fair market value at the time of exercise, as
determined in good faith by the Plan Administrator, equal to the exercise price.
(You should consult your tax advisor before exercising this option with stock
you received upon the exercise of an incentive stock option.)
WITHHOLDING TAXES: As a condition to the exercise of any portion of this
option which is treated as a nonqualified stock option, you shall make such
arrangements as the Company may require for the satisfaction of any federal,
state or local withholding tax obligations that may arise in connection with
such exercise. The Company shall have the right to retain without notice
sufficient shares of stock to satisfy the withholding obligation. To the extent
permitted or required by the Company, you may satisfy the withholding obligation
by electing to have the Company or related corporation withhold from the shares
to be issued upon exercise that number of shares having a fair market value
equal to the amount required to be withheld. INDIVIDUALS SUBJECT TO SECTION 16
OF THE EXCHANGE ACT MUST COMPLY WITH CERTAIN REQUIREMENTS IN ORDER TO MAKE SUCH
ELECTION.
TRANSFER OF OPTION: The option is not transferable except by will or
by the applicable laws of descent and distribution.
<PAGE> 14
HOLDING PERIODS:
A. SECURITIES AND EXCHANGE ACT SECTION 16
Shares of Common Stock obtained upon the exercise of a stock option may
not be sold by a person subject to Section 16 of the Exchange Act until six
months after the date the option was granted.
B. TAXATION OF STOCK OPTIONS
In order to obtain certain tax benefits afforded to incentive stock
options under Section 422 of the Code, an optionee must hold the shares issued
upon the exercise of an incentive stock option for two years after the date of
grant of the option and one year from the date of exercise. An optionee may be
subject to the alternative minimum tax at the time of exercise.
Tax advice should be obtained when exercising any option and prior to
the disposition of the shares issued upon the exercise of any option.
REGISTRATION: YOUR PARTICULAR ATTENTION IS DIRECTED TO SECTION 8 OF THE
PLAN WHICH DESCRIBES CERTAIN IMPORTANT CONDITIONS RELATING TO FEDERAL AND STATE
SECURITIES LAWS THAT MUST BE SATISFIED BEFORE THE OPTION CAN BE EXERCISED AND
BEFORE THE COMPANY CAN ISSUE ANY SHARES TO YOU. THE COMPANY HAS NO OBLIGATION TO
REGISTER THE SHARES THAT WOULD BE ISSUED UPON THE EXERCISE OF YOUR OPTION, AND
IF IT NEVER REGISTERS THE SHARES, YOU WILL NOT BE ABLE TO EXERCISE THE OPTION
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. AT THE PRESENT TIME,
EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAWS ARE VERY
LIMITED AND MIGHT BE UNAVAILABLE TO YOU PRIOR TO THE EXPIRATION OF THE OPTION.
CONSEQUENTLY, YOU MIGHT HAVE NO OPPORTUNITY TO EXERCISE THE OPTION AND TO
RECEIVE SHARES UPON SUCH EXERCISE.
Please execute the Acceptance and Acknowledgment set forth below on the
enclosed copy of this Agreement and return it to the undersigned.
Very truly yours,
THE ZONE NETWORK, INC.
By________________________________
Skip K. Franklin, President
<PAGE> 15
ACCEPTANCE AND ACKNOWLEDGMENT
I, a resident of the State of Washington, accept the incentive stock
option described above and in The Zone Network's 1996 Stock Option Plan, and
acknowledge receipt of a copy of this Agreement and a copy of the Plan. I have
read and understand the Plan, including the provisions of Section 8.
Dated: _______________, 199_
______________________________ ___________________________________________
Taxpayer I.D. Number Signature
Address:
___________________________________________
___________________________________________
By his or her signature below, the spouse of the Optionee, if such Optionee is
legally married as of the date of his or her execution of this Agreement,
acknowledges that he or she has read this Agreement and the Plan and is familiar
with the terms and provisions thereof, and agrees to be bound by all the terms
and conditions of this Agreement and the Plan.
Dated: _________________
___________________________________________
Spouse's Signature
___________________________________________
Printed Name
By his or her signature below, the Optionee represents that he or she is
not legally married as of the date of execution of this Agreement.
Dated: _________________
___________________________________________
Optionee's Signature
<PAGE> 16
NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION
To: The Zone Network, Inc.:
I, a resident of the State of _____________, hereby exercise my
incentive stock option granted by The Zone Network, Inc. (the "Company") on
____________, 19__, subject to all the terms and provisions thereof and of the
1996 Stock Option Plan referred to therein, and notify the Company of my desire
to purchase _______ shares of Common Stock of the Company (the "Securities") at
the exercise price of $_______ per share which were offered to me pursuant to
said option.
I hereby represent and warrant that (1) I have been furnished with a
copy of the Plan and all information which I deem necessary to evaluate the
merits and risks of the purchase of the Securities; (2) I have had the
opportunity to ask questions and receive answers concerning the information
received about the Securities and the Company; and (3) I have been given the
opportunity to obtain any additional information I deem necessary to verify the
accuracy of any information obtained concerning the Securities and the Company.
I am aware that the Securities have not been registered under the
Federal Securities Act of 1933 (the "1933 Act") or any state securities laws,
pursuant to exemption(s) from registration. I understand that the reliance by
the Company on such exemption(s) is predicated in part upon the truth and
accuracy of the statements by me in this Notice of Exercise.
I hereby represent and warrant that I am purchasing the Securities for
my own personal account for investment and not with a view to the sale or
distribution of all or any part of the Securities.
I understand that because the Securities have not been registered under
the 1933 Act, I must continue to bear the economic risk of the investment for an
indefinite time and the Securities cannot be sold unless the Securities are
subsequently registered or an exemption from registration is available.
I agree that I will in no event sell or distribute all or any part of the
Securities unless (1) there is an effective registration statement under the
1933 Act and applicable state securities laws covering any such transaction
involving the Securities or (2) the Company receives an opinion of my legal
counsel (concurred in by legal counsel for the
<PAGE> 17
Company) stating that such transaction is exempt from registration or the
Company otherwise satisfies itself that such transaction is exempt from
registration.
I consent to the placing of a legend on my certificate(s) for the
Securities stating that the Securities have not been registered and setting
forth the restriction on transfer contemplated hereby and to the placing of a
stop transfer order on the books of the Company and with any transfer agents
against the Securities until the Securities may be legally resold or
distributed.
I understand that at the present time Rule 144 of the Securities and
Exchange Commission ("SEC") may not be relied on for the resale or distribution
of the Securities by me. I understand that the Company has no obligation to me
to register the Securities with the SEC and has not represented to me that it
will register the Securities.
I AM ADVISED, PRIOR TO MY PURCHASE OF THE SECURITIES, THAT NEITHER THE
OFFERING OF THE SECURITIES NOR ANY OFFERING MATERIALS HAVE BEEN REVIEWED BY ANY
ADMINISTRATOR UNDER THE SECURITIES ACT OF 1933, THE WASHINGTON STATE SECURITIES
ACT OR ANY OTHER APPLICABLE SECURITIES ACT (THE "ACTS") AND THAT THE SECURITIES
HAVE NOT BEEN REGISTERED UNDER ANY OF THE ACTS AND THEREFORE CANNOT BE RESOLD
UNLESS THEY ARE REGISTERED UNDER THE ACTS OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
Dated: _________________
_____________________ ___________________________________
Taxpayer I.D. Number Signature
Address:
___________________________________
___________________________________
___________________________________
<PAGE> 18
ZONENETWORK.COM, INC.
NONQUALIFIED STOCK OPTION LETTER AGREEMENT
TO: Date of Grant: , 199
-------------------------------------- --------- -- --
We are pleased to inform you that you have been selected by the Plan
Administrator of ZoneNetwork.com, Inc.'s (the "Company") 1996 Stock Option Plan
(the "Plan") to receive a nonqualified option for the purchase of __________
shares of the Company's Common Stock at an exercise price of $__________ per
share. The Plan is incorporated into this Agreement by reference.
The terms of the option are as set forth in the Plan and in this
Agreement. This Agreement is subject to and in accordance with the express terms
and conditions of the Plan and is in all respects limited by and subject to the
express terms and provisions of the Plan. The most important of the terms set
forth in the Plan are summarized as follows:
TERM: The term of the option is ten years from date of grant, unless
sooner terminated.
VESTING: The option shall vest and become exercisable according to the
following schedule:
<TABLE>
<CAPTION>
Exercise Date Portion of Total Option Which Is Exercisable
- ------------------------------- --------------------------------------------
<S> <C>
after one year: 33.3333%
after each three-month period an additional
completed thereafter: 8.3333%
</TABLE>
TERMINATION: The option will terminate immediately upon termination for
cause, as defined in the Plan, or three months after cessation of your
relationship with the Company or a related corporation, unless cessation is due
to total disability, in which case the option shall terminate 12 months after
cessation of such relationship.
EXERCISE: During your lifetime only you can exercise the option. The Plan
also provides for exercise of the option by the personal representative of your
estate or the beneficiary of your estate following your death. You may use the
Notice of Exercise of
<PAGE> 19
Nonqualified Stock Option in the form attached to this Agreement when you
exercise the option.
The Plan Administrator may, in its sole discretion at the time of
exercise, determine that the exercise of this option is subject to your
execution of an agreement, in the form in use at the time of exercise, whereby
under certain circumstances, you grant to the Company a right of first offer to
purchase the shares acquired by you upon exercise of the option.
PAYMENT FOR SHARES: Unless the Plan Administrator at any time determines
otherwise, the option may be exercised by the delivery of:
(a) Cash or check; or
(b) Shares of the capital stock of the Company held by you for a period of
at least six months having a fair market value at the time of exercise, as
determined in good faith by the Plan Administrator, equal to the exercise price.
WITHHOLDING TAXES: As a condition to the exercise of a nonqualified stock
option, you shall make such arrangements as the Company may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such exercise. The Company shall have the right to
retain without notice sufficient shares of stock to satisfy the withholding
obligation. Unless the Plan Administrator determines otherwise, you may satisfy
the withholding obligation by electing to have the Company or related
corporation withhold from the shares to be issued upon exercise that number of
shares having a fair market value equal to the amount required to be withheld.
TRANSFER OF OPTION: The option is not transferable except by will[, to a
Designated Beneficiary, ]or by the applicable laws of descent and distribution.
HOLDING PERIOD: Shares of Common Stock obtained upon the exercise of a
stock option may not be sold by a person subject to Section 16 of the Exchange
Act until six months from the date the option was granted.
REGISTRATION: YOUR PARTICULAR ATTENTION IS DIRECTED TO SECTION 8 OF THE
PLAN, WHICH DESCRIBES CERTAIN IMPORTANT CONDITIONS RELATING TO FEDERAL AND STATE
SECURITIES LAWS THAT MUST BE SATISFIED BEFORE THE OPTION CAN BE EXERCISED AND
BEFORE THE COMPANY CAN ISSUE ANY SHARES TO YOU. THE COMPANY HAS NO OBLIGATION TO
REGISTER THE
-2-
<PAGE> 20
SHARES THAT WOULD BE ISSUED UPON THE EXERCISE OF YOUR OPTION, AND IF IT NEVER
REGISTERS THE SHARES, YOU WILL NOT BE ABLE TO EXERCISE THE OPTION UNLESS AN
EXEMPTION FROM REGISTRATION IS AVAILABLE. AT THE PRESENT TIME, EXEMPTIONS FROM
REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAWS ARE VERY LIMITED AND MIGHT
BE UNAVAILABLE TO YOU PRIOR TO THE EXPIRATION OF THE OPTION. CONSEQUENTLY, YOU
MIGHT HAVE NO OPPORTUNITY TO EXERCISE THE OPTION AND TO RECEIVE SHARES UPON SUCH
EXERCISE.
Please execute the Acceptance and Acknowledgment set forth below on the
enclosed copy of this Agreement and return it to the undersigned.
Very truly yours,
ZONENETWORK.COM, INC.
By
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Charles Gottschalk, President
-3-
<PAGE> 21
ACCEPTANCE AND ACKNOWLEDGMENT
I, a resident of the State of ___________________, accept the nonqualified
stock option described above and in ZoneNetwork.com, Inc.'s 1996 Stock Option
Plan and acknowledge receipt of a copy of this Agreement and a copy of the Plan.
I have read and understand the Plan, including the provisions of Section 8.
Dated:
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Taxpayer I.D. Number Signature
Address:
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By his or her signature below, the spouse of the Optionee, if such
Optionee is legally married as of the date of his or her execution of this
Agreement, acknowledges that he or she has read this Agreement and the Plan and
is familiar with the terms and provisions thereof, and agrees to be bound by all
the terms and conditions of this Agreement and the Plan.
Dated:
------------------------
-----------------------------------
Spouse's Signature
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Printed Name
By his or her signature below, the Optionee represents that he or she is
not legally married as of the date of execution of this Agreement.
Dated:
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Optionee's Signature
<PAGE> 22
NOTICE OF EXERCISE OF NONQUALIFIED STOCK OPTION
To: ZoneNetwork.com
I, a resident of the State of ___________________, hereby exercise my
nonqualified stock option granted by ZoneNetwork.com, Inc. (the "Company") on
_____________, 19___, subject to all the terms and provisions thereof and of the
1996 Stock Option Plan referred to therein, and notify the Company of my desire
to purchase ________ shares of Common Stock of the Company (the "Securities") at
the exercise price of $__________ per share which were offered to me pursuant to
said option.
I hereby represent and warrant that (1) I have been furnished with a copy
of the Plan and all information which I deem necessary to evaluate the merits
and risks of the purchase of the Securities; (2) I have had the opportunity to
ask questions and receive answers concerning the information received about the
Securities and the Company; and (3) I have been given the opportunity to obtain
any additional information I deem necessary to verify the accuracy of any
information obtained concerning the Securities and the Company.
I am aware that the Securities have not been registered under the Federal
Securities Act of 1933 (the "1933 Act") or any state securities laws, pursuant
to exemption(s) from registration. I understand that the reliance by the Company
on such exemption(s) is predicated in part upon the truth and accuracy of the
statements by me in this Notice of Exercise.
I hereby represent and warrant that I am purchasing the Securities for my
own personal account for investment and not with a view to the sale or
distribution of all or any part of the Securities.
I understand that because the Securities have not been registered under
the 1933 Act, I must continue to bear the economic risk of the investment for an
indefinite time and the Securities cannot be sold unless the Securities are
subsequently registered or an exemption from registration is available.
I agree that I will in no event sell or distribute all or any part of the
Securities unless (1) there is an effective registration statement under the
1933 Act and applicable state securities laws covering any such transaction
involving the Securities or (2) the Company receives an opinion of my legal
counsel (concurred in by legal counsel for the
<PAGE> 23
Company) stating that such transaction is exempt from registration or the
Company otherwise satisfies itself that such transaction is exempt from
registration.
I consent to the placing of a legend on my certificate(s) for the
Securities stating that the Securities have not been registered and setting
forth the restriction on transfer contemplated hereby and to the placing of a
stop transfer order on the books of the Company and with any transfer agents
against the Securities until the Securities may be legally resold or
distributed.
I understand that at the present time Rule 144 of the Securities and
Exchange Commission ("SEC") may not be relied on for the resale or distribution
of the Securities by me. I understand that the Company has no obligation to me
to register the Securities with the SEC and has not represented to me that it
will register the Securities.
I AM ADVISED, PRIOR TO MY PURCHASE OF THE SECURITIES, THAT NEITHER THE
OFFERING OF THE SECURITIES NOR ANY OFFERING MATERIALS HAVE BEEN REVIEWED BY ANY
ADMINISTRATOR UNDER THE SECURITIES ACT OF 1933, THE WASHINGTON STATE SECURITIES
ACT OR ANY OTHER APPLICABLE SECURITIES ACT (THE "ACTS") AND THAT THE SECURITIES
HAVE NOT BEEN REGISTERED UNDER ANY OF THE ACTS AND THEREFORE CANNOT BE RESOLD
UNLESS THEY ARE REGISTERED UNDER THE ACTS OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
Dated:
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Taxpayer I.D. Number Signature
Address:
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