<PAGE> 1
As filed with the Securities and Exchange Commission on February 29, 2000
Registration No. 333-_______________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
CONTINUUS SOFTWARE CORPORATION
(Exact Name Of Registrant As Specified In Its Charter)
---------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7372 43-1070080
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
Incorporation or Organization) Classification Code Number)
</TABLE>
---------------------------
108 PACIFICA
IRVINE, CALIFORNIA 92618
(949) 453-2200
(Address Of Principal Executive Offices)
---------------------------
PAGODA CORPORATION 1998 STOCK INCENTIVE PLAN
(Full Title of The Plans)
---------------------------
JOHN R. WARK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CONTINUUS SOFTWARE CORPORATION
108 PACIFICA
IRVINE, CALIFORNIA 92618
(949) 453-2200
(Name, Address and Telephone Number, Including Area Code, of Agent for Service)
---------------------------
COPIES TO:
D. BRADLEY PECK, ESQ.
COOLEY GODWARD LLP
4365 EXECUTIVE DRIVE, SUITE 1100
SAN DIEGO, CALIFORNIA 92121
(858) 550-6000
---------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED SHARE (1) PRICE (1) REGISTRATION FEE
---------------- ---------- --------- --------- ----------------
<S> <C> <C> <C> <C>
Common Stock, par
value 13,199.00 $0.66-$1.74 $10,430.70 $3.00
</TABLE>
<PAGE> 2
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457. The price per share and aggregate
offering price are based upon the actual exercise price for shares
subject to outstanding stock options previously granted under the
Registrant's Pagoda Corporation 1998 Stock Incentive Plan. The following
chart shows the calculation of the registration fee:
<TABLE>
<CAPTION>
Offering
Price Per Aggregate
Type of Shares Number of Shares Share Offering Price
-------------- ---------------- ----- --------------
<S> <C> <C> <C>
Common Stock issuable pursuant to
outstanding options under the Pagoda
Corporation 1998 Stock Incentive Plan 1,592 $1.74 $2,770.08
Common Stock issuable pursuant to
outstanding options under the Pagoda
Corporation 1998 Stock Incentive Plan 11,607 $0.66 $7,660.62
</TABLE>
<PAGE> 3
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed by Continuus Software Corporation, (the
"Company" or the "Registrant"), with the Securities and Exchange Commission are
incorporated by reference into this Registration Statement:
(a) The prospectus contained in the Form S-1 Registration Statement (No.
333-76893) filed by the Company with the Securities and Exchange Commission (the
"Commission") on April 23, 1999, as amended through the date hereof (the "Form
S-1").
(b) A description of the Registrant's Common Stock which is contained in
the Form S-1, including any amendment or reports filed for the purpose of
updating.
(c) The Company's Quarterly Report on Form 10-Q, filed on November 15,
1999 pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
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.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law, the
Registrant has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act.
The Registrant's Restated Certificate of Incorporation and Bylaws
include provisions to (i) eliminate the personal liability of its directors for
monetary damages resulting from breaches of their fiduciary duty to the extent
permitted by Section 102(b)(7) of the General Corporation Law of Delaware (the
"Delaware Law") and (ii) require the Registrant to indemnify its directors and
executive officers to the fullest extent permitted by Section 145 of the
Delaware Law, including circumstances in which indemnification is otherwise
discretionary. Pursuant to Section 145 of the Delaware Law, a corporation
generally has the power to indemnify its present and former directors, officers,
employees and agents against expenses incurred by them in connection with any
suit to which they are or are threatened to be made, a party by reason of their
serving in such positions so long as they acted in good faith and in a manner
they reasonably believed to be in or not opposed to, the best interests of the
corporation and with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful. The Registrant believes that these
provisions are necessary to attract and retain qualified persons as directors
and officers. These provisions do not eliminate the directors' duty of care,
and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware Law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Registrant, for acts or omissions not in
good faith or involving intentional misconduct, for knowing violations of law,
for acts or omissions that the director believes to be contrary to the best
interests of the Registrant or its stockholders, for any transaction from which
the director derived an improper personal benefit, for acts or omissions
involving a reckless disregard for the director's duty to the Registrant or its
stockholders when the director was aware or should have been aware of a risk of
serious injury to the Registrant or its stockholders, for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the Registrant or its stockholders, for improper
transactions between the director and the Registrant and for improper
distributions to stockholders and loans to directors and officers. The provision
also does not affect a director's responsibilities under any other law, such as
the federal securities law or state or federal environmental laws.
1.
<PAGE> 4
The Registrant has entered into indemnity agreements with each of its
directors and executive officers that require the Registrant to indemnify such
persons against any and all expenses (including attorneys' fees), witness fees,
damages, judgments, fines, settlements and other amounts incurred (including
expenses of a derivative action) in connection with any action, suit or
proceeding, whether actual or threatened, to which any such person may be made a
party by reason of the fact that such person is or was a director, an officer or
an employee of the Registrant or any of its affiliated enterprises, provided
that such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Registrant and,
with respect to any criminal proceeding, had no reasonable cause to believe his
conduct was unlawful. The indemnification agreements also set forth certain
procedures that will apply in the event of a claim for indemnification
thereunder.
At present, there is no pending litigation or proceeding involving a
director, officer or key employee of the Registrant as to which indemnification
is being sought nor is the Registrant aware of any threatened litigation that
may result in claims for indemnification by any officer or director.
The Registrant has an insurance policy covering the officers and
directors of the Registrant with respect to certain liabilities, including
liabilities arising under the Securities Act or otherwise.
ITEM 8. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
5.1 Opinion of Cooley Godward LLP
23.1 Consent of Deloitte & Touche LLP
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 Pagoda Corporation 1998 Stock Incentive Plan
99.2 Form of Incentive Stock Option Agreement under the 1998 Stock
Incentive Plan
</TABLE>
ITEM 9. 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) 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.
(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;
2.
<PAGE> 5
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 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 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 therein, 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 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. 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.
3.
<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 Irvine, State of California, on February 29,
2000.
CONTINUUS SOFTWARE CORPORATION
By /S/ John R. Wark
---------------------------------
John R. Wark,
President, Chief Executive
Officer and Chairman of the Board
of Directors
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints John R. Wark and Steven L. Johnson 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, 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/ John R. Wark President, Chief Executive Officer February 29, 2000
- ----------------------------- and Chairman of the Board of
JOHN R. WARK Directors (Principal Executive
Officer)
/S/ Steven L. Johnson Vice President, Finance and Chief February 29, 2000
- ----------------------------- Financial Officer (Principal
STEVEN L. JOHNSON Financial and Accounting Officer)
/S/ Fred B. Cox Director February 29, 2000
- -----------------------------
FRED B. COX
/S/ Kevin G. Hall Director February 29, 2000
- -----------------------------
KEVIN G. HALL
/S/ A. Barry Patmore Director February 29, 2000
- -----------------------------
A. BARRY PATMORE
/S/ Stewart A. Schuster Director February 29, 2000
- -----------------------------
STEWART A. SCHUSTER
/S/ Sol Zechter Director February 29, 2000
- -----------------------------
SOL ZECHTER
</TABLE>
4.
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
5.1 Opinion of Cooley Godward LLP
23.1 Consent of Deloitte & Touche LLP
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 Pagoda Corporation 1998 Stock Incentive Plan
99.2 Form of Incentive Stock Option Agreement under the 1998 Plan
</TABLE>
5.
<PAGE> 1
EXHIBIT 5.1
[COOLEY GODWARD LLP LETTERHEAD]
February 29, 2000
Continuus Software Corporation
108 Pacifica
Irvine, CA 92618
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by CONTINUUS SOFTWARE CORPORATION (the "Company") of a
Registration Statement on Form S-8 (the "Registration Statement") with the
Securities and Exchange Commission, covering the registration of 13,199 shares
of the Company's Common Stock, $.001 par value (the "Shares"), issuable upon the
exercise of outstanding options issued pursuant to the Pagoda Corporation 1998
Stock Incentive Plan (the "Plan"). Such options were assumed by the Company in
connection with the Agreement and Plan of Merger and Reorganization dated
January 19, 2000, as amended (the "Merger Agreement"), by and among the Company,
Gerbil Acquisition Corp., Pagoda Corporation, and certain representatives of the
stockholders of Pagoda.
In connection with this opinion, we have examined and relied upon the
Registration Statement and related prospectus, the Plan, the form of option
agreement, the Merger Agreement, the Company's Amended and Restated Certificate
of Incorporation and Bylaws, and the originals or copies certified to our
satisfaction of such records, documents, certificates, memoranda and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below. 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 and the
assumed option agreements, will be validly issued, fully paid, and
nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
COOLEY GODWARD LLP
/S/ D. Bradley Peck
- ---------------
D. Bradley Peck
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Continuus Software Corporation on Form S-8 of our report dated January 26, 1999,
except for paragraph 1 of Note 10, as to which the date is April 16, 1999; Note
14, as to which the date is April 30, 1999; and paragraphs 3 and 4 of Note 1, as
to which the dates are July 13, 1999 and July 21, 1999, appearing in
Registration Statement No. 333-76893 on Form S-1 of Continuus Corporation for
the year ended December 31, 1998.
/S/ Deloitte & Touche LLP
- -------------------------
DELOITTE & TOUCHE LLP
Costa Mesa, California
February 28, 2000
<PAGE> 1
EXHIBIT 99.1
PAGODA CORPORATION
1998 STOCK INCENTIVE PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Purpose........................................................... 1
2. Definitions....................................................... 1
(a) "Board".................................................... 1
(b) "Change in Control"........................................ 1
(c) "Code"..................................................... 1
(d) "Committee"................................................ 1
(e) "Common Stock"............................................. 2
(f) "Company".................................................. 2
(g) "Consultant"............................................... 2
(h) "Employee"................................................. 2
(i) "Exercise Price"........................................... 2
(j) "Fair Market Value"........................................ 2
(k) "Incentive Stock Option"................................... 2
(l) "Non-Employee Director".................................... 2
(m) "Nonstatutory Option"...................................... 2
(n) "Offeree".................................................. 2
(o) "Option"................................................... 2
(p) "Optionee"................................................. 2
(q) "Parent"................................................... 2
(r) "Plan"..................................................... 2
(s) "Purchase Price"........................................... 2
(t) "Service".................................................. 2
(u) "Stock Option Agreement"................................... 2
(v) "Stock Purchase Agreement"................................. 2
(w) "Subsidiary"............................................... 3
(x) "Ten Percent Stockholder".................................. 3
3. Administration.................................................... 4
(a) Committees of the Board.................................... 4
(b) Authority of the Board..................................... 4
4. Eligibility....................................................... 4
5. Stock Subject to Plan............................................. 4
(a) Basic Limitation........................................... 4
(b) Additional Shares.......................................... 4
6. Terms and Conditions of Grants or Sales............................ 4
(a) Stock Purchase Agreement................................... 4
(b) Duration of Offers and Nontransferability of Rights........ 5
(c) Purchase Price............................................. 5
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
(d) Withholding Taxes.......................................... 5
(e) Restrictions on Transfer of Common Stock................... 5
7. Terms and Conditions of Options................................... 5
(a) Stock Option Agreement..................................... 5
(b) Number of Shares........................................... 6
(c) Exercise Price............................................. 6
(d) Withholding Taxes.......................................... 6
(e) Vesting/Exercisability..................................... 6
(f) Term....................................................... 7
(g) Nontransferability......................................... 7
(h) Exercise of Options on Termination of Service.............. 7
(i) No Rights as a Stockholder................................. 7
(j) Modification, Extension and Assumption of Options.......... 7
(k) Restrictions on Transfer................................... 7
8. Forms of Payment.................................................. 8
(a) General Rule............................................... 8
(b) Surrender of Stock......................................... 8
(c) Promissory Notes........................................... 8
(d) Exercise/Sale.............................................. 8
(e) Exercise/Pledge............................................ 8
9. Adjustments Upon Changes in Common Stock.......................... 9
(a) General.................................................... 9
(b) Mergers and Consolidations................................. 9
(c) Reservation of Rights...................................... 10
10. Legal Requirements................................................ 10
(a) Restrictions on Issuance................................... 10
(b) Financial Reports.......................................... 10
11. No Employment Rights.............................................. 10
12. Duration and Amendments........................................... 11
(a) Term of the Plan........................................... 11
(b) Right to Amend or Terminate the Plan....................... 11
(c) Effect of Amendment or Termination......................... 11
13. Execution......................................................... 11
</TABLE>
<PAGE> 4
PAGODA CORPORATION
1998 STOCK INCENTIVE PLAN
ADOPTED BY THE BOARD JULY 27, 1998
1. Purpose.
The purpose of the Plan is to offer selected employees, directors and
consultants an opportunity to acquire a proprietary interest in the success of
the Company, or to increase such interest, to encourage such persons to remain
in the employ of the Company and to attract new employees with outstanding
qualifications.
The Plan provides for the direct grant or sale of Common Stock and for
the grant of Options to purchase Common Stock. Options granted under the Plan
may include Nonstatutory Options as well as Incentive Stock Options intended to
qualify under section 422 of the Internal Revenue Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company, as
constituted from time to time.
(b) "Change in Control" shall mean any one of the following events:
(i) The consummation of a merger, consolidation or other
reorganization of the Company (other than a reincorporation of the
Company), if after giving effect to such merger, consolidation or other
reorganization of the Company, the stockholders of the Company
immediately prior to such merger, consolidation or other reorganization
do not represent a majority in interest of the holders of voting
securities (on a fully diluted basis) with the ordinary voting power to
elect directors of the surviving or resulting entity after such merger,
consolidation or other reorganization; provided, however, that in no
event shall the initial public offering of the Company's common stock
constitute a Change in Control; or
(ii) The sale of all or substantially all of the assets of the
Company to a third party who is not an affiliate of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Committee" shall mean a committee consisting of one or more members
of the Board that is appointed by the Board to administer the Plan.
(e) "Common Stock" means the Company's common stock.
(f) "Company" shall mean Pagoda Corporation, a Delaware corporation.
1
<PAGE> 5
(g) "Consultant" shall mean an individual who performs bona fide services
to the Company, a Parent or a Subsidiary other than as an Employee or a member
of the Board.
(h) "Employee" shall mean any individual who is a common-law employee of
the Company, a Parent or a Subsidiary.
(i) "Exercise Price" shall mean the amount for which one share of Common
Stock may be purchased upon exercise of an Option, as specified by the Board in
the applicable Stock Option Agreement.
(j) "Fair Market Value" shall mean the fair market value of a share of
Common Stock, as determined by the Board in good faith. Such determination shall
be conclusive and binding on all persons.
(k) "Incentive Stock Option" or "ISO" shall mean an incentive stock
option described in Code section 422(b).
(l) "Non-Employee Director" shall mean a member of the Board who is not
an Employee.
(m) "Nonstatutory Option" or "NSO" shall mean a stock option that is not
an ISO.
(n) "Offeree" shall mean an individual to whom the Board has offered the
right to acquire Common Stock other than upon exercise of an Option.
(o) "Option" shall mean an ISO or NSO granted under the Plan entitling
the holder to purchase Common Stock.
(p) "Optionee" shall mean an individual who holds an Option.
(q) "Parent" shall have the meaning set forth in section 424(e) of the
Code.
(r) "Plan" shall mean this 1998 Stock Incentive Plan.
(s) "Purchase Price" shall mean the consideration for which one share of
Common Stock may be acquired under the Plan pursuant to a grant or sale under
Section 6, as specified by the Board.
(t) "Service" shall mean service as an Employee, Non-Employee Director or
Consultant.
(u) "Stock Option Agreement" shall mean the agreement between the Company
and an Optionee that contains the terms, conditions and restrictions pertaining
to an Option.
(v) "Stock Purchase Agreement" shall mean the agreement between the
Company and an Offeree who acquires Common Stock under the Plan (other than
pursuant to an Option) that contains the terms, conditions and restrictions
pertaining to the acquisition of such Common Stock.
2
<PAGE> 6
(w) "Subsidiary" shall have the meaning set forth in section 424(f) of
the Code. A corporation that attains the status of a Subsidiary on a date after
the adoption of the Plan shall be considered a Subsidiary commencing as of such
date.
(x) "Ten Percent Stockholder" means an individual who owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
stock of the Company, its Parent or any of its Subsidiaries. In determining
stock ownership, the attribution rules of section 424(d) of the Code shall be
applied.
3. Administration.
(a) Committees of the Board. The Plan shall be administered by the Board.
However, any or all administrative functions otherwise exercisable by the Board
may be delegated to a Committee. Members of the Committee shall serve for such
period of time as the Board may determine and shall be subject to removal by the
Board at any time. The Board may also at any time terminate the functions of the
Committee and reassume all powers and authority previously delegated to the
Committee. Any reference to the Board in the Plan shall be construed as a
reference to the Committee (if any) to whom the Board has assigned a particular
function.
(b) Authority of the Board. Subject to the provisions of the Plan, the
Board shall have full authority and discretion to take any actions it deems
necessary or advisable for the administration of the Plan. All decisions,
interpretations and other actions of the Board shall be final and binding on all
parties who have an interest in the Plan or any option or shares issued
thereunder.
4. Eligibility.
Only Employees, Non-Employee Directors and Consultants shall be eligible
for the grant of Options or the direct grant or sale of Common Stock. Only
Employees shall be eligible for the grant of ISOs.
5. Stock Subject to Plan.
(a) Basic Limitation. The stock issuable under the Plan shall be shares
of authorized but unissued or reacquired Common Stock. The maximum number of
shares of Common Stock which may be issued under the Plan shall not exceed two
million (2,000,000) shares, subject to adjustment pursuant to Section 9.
(b) Additional Shares. If any outstanding Option or other right to
acquire Common Stock for any reason expires or is canceled, forfeited or
otherwise terminated, the Common Stock allocable to the unexercised portion of
such Option or other right shall again be available for the purposes of the
Plan. If shares of Common Stock issued under the Plan are reacquired by the
Company pursuant to any right of repurchase or right of first refusal, such
shares of Common Stock shall again be available for the purposes of the Plan,
except such shares shall not be available for ISOs.
3
<PAGE> 7
6. Terms and Conditions of Grants or Sales.
(a) Stock Purchase Agreement. Each grant or sale of Common Stock under
the Plan other than upon exercise of an Option shall be evidenced by a Stock
Purchase Agreement between the Offeree and the Company. Such grant or sale shall
be subject to all applicable terms and conditions of the Plan and may be subject
to any other terms and conditions that are not inconsistent with the Plan and
that the Board deems appropriate for inclusion in a Stock Purchase Agreement.
The provisions of the various Stock Purchase Agreements entered into under the
Plan need not be identical.
(b) Duration of Offers and Nontransferability of Rights. Any right to
acquire Common Stock under the Plan other than an Option shall automatically
expire if not exercised by the Offeree within the number of days specified by
the Board and communicated to the Offeree. Such right shall not be transferable
and shall be exercisable only by the Offeree to whom such right was granted.
(c) Purchase Price. The Purchase Price shall be established by the Board
and set forth in the Stock Purchase Agreement and, to the extent required to
comply with the California Corporations Code or the regulations thereunder,
shall not be less than eighty-five percent (85%) of Fair Market Value (one
hundred percent (100%) for Ten Percent Stockholders). The Purchase Price shall
be payable in a form described in Section 8 or, in the discretion of the Board,
in consideration for past services rendered to the Company or for its benefit.
(d) Withholding Taxes. As a condition to the purchase of Common Stock,
the Offeree shall make such arrangements as the Board may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such purchase.
(e) Restrictions on Transfer of Common Stock. No Common Stock granted or
sold under the Plan may be sold, made the subject of any short sale or loan,
hypothecated, pledged, optioned or otherwise transferred or disposed of by the
Offeree for such period of time not to exceed one hundred eighty (180) days
following the effective date of a registration statement covering securities of
the Company filed under the Securities Act of 1933, as amended, unless such
restriction is consented to or waived by the managing underwriter. Subject to
the preceding sentence, any Common Stock granted or sold under the Plan shall be
subject to such special conditions, rights of repurchase, rights of first
refusal and other transfer restrictions as the Board may determine. Such
restrictions shall apply in addition to any general restrictions that may apply
to all holders of Common Stock.
7. Terms and Conditions of Options.
(a) Stock Option Agreement. Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and conditions of the Plan
and may be subject to any other terms and conditions that are not inconsistent
with the Plan and that the Board deems appropriate for inclusion in a Stock
Option Agreement. The provisions of the various Stock Option Agreements entered
into under the Plan need not be identical.
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(b) Number of Shares. Each Stock Option Agreement shall specify the
number of shares of Common Stock that are subject to the Option and shall
provide for the adjustment of such number in accordance with Section 9. The
Stock Option Agreement shall also specify whether the Option is an ISO or a NSO.
To the extent that the aggregate Fair Market Value of the Common Stock subject
to ISOs that are exercisable for the first time by any Optionee during any
calendar year (under all plans of the Company and any Parent or Subsidiary)
exceeds $100,000, such Options shall be treated as NSOs. For purposes of this
Section 7(b), ISOs shall be taken into account in the order in which they were
granted. The Fair Market Value of the Common Stock shall be determined as of the
time the Option with respect to such Common Stock is granted.
(c) Exercise Price. An Option's Exercise Price shall be established by
the Board and set forth in a Stock Option Agreement. The Exercise Price of an
ISO shall not be less than one hundred percent (100%) of the Fair Market Value
(one hundred ten percent (110%) for Ten Percent Stockholders) on the date of
grant. The Exercise Price of a NSO shall not be less than eight-five percent
(85%) of the Fair Market Value (one hundred ten percent (110%) for Ten Percent
Stockholders) on the date of grant. The Exercise Price shall be payable in a
form described in Section 8. Notwithstanding the foregoing, an Option may be
granted with an exercise price lower than that set prescribed in this paragraph
if the Option grant is attributable to the issuance or assumption of an option
in a transaction to which Code section 424(a) applies.
(d) Withholding Taxes. As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Board may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations
that may arise in connection with such exercise. The Optionee shall also make
such arrangements as the Board may require for the satisfaction of any federal,
state, local or foreign withholding tax obligations that may arise in connection
with the disposition of Common Stock acquired by exercising an Option.
(e) Vesting/Exercisability. Each Stock Option Agreement shall specify the
date when all or any installment of the Option is to vest or become exercisable.
To the extent required to comply with the California Corporations Code or the
regulations thereunder, an Option granted to Employees who are not officers
shall vest and become exercisable no less rapidly than the rate of twenty
percent (20%) per year for each of the first five (5) years from the date of
grant. Subject to the preceding sentence, the vesting of any Option shall be
determined by the Board in its sole discretion. A Stock Option Agreement may
permit an Optionee to exercise an Option before it is vested, subject to the
Company's right of repurchase over any shares acquired under the unvested
portion of the Option (an "early exercise"), which right of repurchase shall
lapse at the same rate the Option would have vested had there been no early
exercise. A Stock Option Agreement may, but need not, provide for full or
partial vesting in connection with a Change in Control.
(f) Term. The Stock Option Agreement shall specify the term of the
Option. The term shall not exceed ten (10) years from the date of grant (five
(5) years in the case of an ISO granted to a Ten Percent Stockholder). Subject
to the preceding sentence, the Board at its sole discretion shall determine when
an Option is to expire.
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(g) Nontransferability. No Option shall be transferable by the Optionee
other than by will or by the laws of descent and distribution. An Option may be
exercised during the lifetime of the Optionee only or by the guardian or legal
representative of the Optionee. No Option or interest therein may be
transferred, assigned, pledged or hypothecated by the Optionee during his
lifetime, whether by operation of law or otherwise, or be made subject to
execution, attachment or similar process.
(h) Exercise of Options on Termination of Service. To the extent required
to comply with the California Corporations Code or the regulations thereunder,
each Stock Option Agreement shall provide that the Optionee shall have the right
to exercise the Option following termination of the Optionee's Service, during
the Option's term, for at least thirty (30) days following termination of
Service for any reason except cause, death or disability, and for at least six
(6) months following termination of Service due to death or disability.
(i) No Rights as a Stockholder. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any Common Stock
covered by an Option until such person becomes entitled to receive such Common
Stock by filing a notice of exercise and paying the Exercise Price pursuant to
the terms of such Option.
(j) Modification, Extension and Assumption of Options. Within the
limitations of the Plan, the Board may modify, extend or assume outstanding
Options or may accept the cancellation of outstanding Options (whether granted
by the Company or another issuer) in return for the grant of new Options for the
same or a different number of shares of Common Stock and at the same or a
different Exercise Price. Notwithstanding the foregoing, no modification of an
Option shall, without the consent of the Optionee, impair the Optionee's rights
or increase the Optionee's obligations under such Option.
(k) Restrictions on Transfer. No shares of Common Stock issued upon
exercise of an Option may be sold or otherwise transferred or disposed of by the
Optionee during the one hundred eighty (180) day period following the effective
date of a registration statement covering securities of the Company filed under
the Securities Act of 1933 (unless such restriction is consented to or waived by
the managing underwriter). Subject to the preceding sentence, any Common Stock
issued upon exercise of an Option shall be subject to such rights of repurchase,
rights of first refusal and other transfer restrictions as the Board may
determine. Such restrictions shall apply in addition to any restrictions that
may apply to holders of Common Stock generally. Any right to repurchase an
Optionee's Common Stock at the original Exercise Price upon termination of the
Optionee's Service shall lapse at least as rapidly as the schedule set forth in
Subsection (e) above. Any such repurchase right may be exercised only within
ninety (90) days after the termination of the Optionee's Service for cash or for
cancellation of indebtedness incurred in purchasing the Common Stock.
8. Forms of Payment.
(a) General Rule. The entire Purchase Price or Exercise Price shall be
payable in cash or cash equivalents acceptable to the Company at the time of
exercise or purchase, except as otherwise provided in this Section 8.
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(b) Surrender of Stock. To the extent that a Stock Option Agreement or
Stock Purchase Agreement so provides, payment may be made all or in part with
Common Stock that has already been owned by the Optionee or the Optionee's
representative for any time period specified by the Board and that are
surrendered to the Company in good form for transfer. Such Common Stock shall be
valued at Fair Market Value on the date when the new Common Stock is purchased
under the Plan.
(c) Promissory Notes. To the extent that a Stock Option Agreement or
Stock Purchase agreement so provides, payment may be made all or in part with a
full recourse promissory note executed by the Optionee. The interest rate and
other terms and conditions of such note shall be determined by the Board. The
Board may require that the Optionee pledge his or her Common Stock to the
Company for the purpose of securing the payment of such note. In no event shall
the stock certificate(s) representing such Common Stock be released to the
Optionee until such note is paid in full, unless otherwise provided in the Stock
Option Agreement or Stock Purchase Agreement.
(d) Exercise/Sale. To the extent that a Stock Option Agreement so
provides, and if the Common Stock is publicly traded, all or any part of the
Exercise Price and any withholding taxes may be paid by delivering (on a form
prescribed by the Company) an irrevocable direction to a securities broker
approved by the Company to sell all or part of the Common Stock being purchased
under the Plan and to deliver all or part of the sales proceeds to the Company.
(e) Exercise/Pledge. To the extent that a Stock Option Agreement so
provides, and if the Common Stock is publicly traded, all or any part of the
Exercise Price and any withholding taxes may be paid by delivering (on a form
prescribed by the Company) an irrevocable direction to pledge all or part of the
Common Stock being purchased under the Plan to a securities broker or lender
approved by the Company, as security for a loan, and to deliver all or part of
the loan proceeds to the Company.
9. Adjustments Upon Changes in Common Stock.
(a) General. In the event of a subdivision of the outstanding Common
Stock, a declaration of a dividend payable in Common Stock, a declaration of an
extraordinary dividend payable in a form other than Common Stock in an amount
that has a material effect on the value of Common Stock, a combination or
consolidation of the outstanding Common Stock into a lesser number of shares, a
recapitalization, a reclassification or a similar occurrence, the Board shall
make appropriate adjustments in one or more of (i) the number of shares of
Common Stock available for future grants of Options or other rights to acquire
Common Stock under Section 5, (ii) the number of shares of Common Stock covered
by each outstanding Option or other right to acquire Common Stock or (iii) the
Exercise Price of each outstanding Option or the Purchase Price of each other
right to acquire Common Stock.
(b) Mergers and Consolidations. In the event that the Company is a party
to a merger or consolidation, outstanding Options or other rights to acquire
Common Stock shall be subject to the agreement of merger or reorganization. Such
agreement, without an Optionee's consent, may provide for:
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(i) The continuation of such outstanding Options by the Company
(if the Company is the surviving corporation);
(ii) The assumption of the Plan and such outstanding Options by
the surviving corporation or its parent;
(iii) The substitution by the surviving corporation or its parent
of options with substantially the same terms for such outstanding
Options; or
(iv) The cancellation of such outstanding Options to the extent
not exercised before the merger or consolidation; provided, however, that
if the Optionee is an Employee, (A) the option vesting start date will be
set back an additional twelve (12) months, so that the Optionee is
credited with an additional twelve (12) months of vesting; and (B) such
cancellation shall not occur unless the Optionee has received either an
opportunity to exercise the vested portion of the Options prior to
cancellation or a cash payment equal in value to the built-in option gain
on the vested portion of the Options, less applicable withholding.
In the event that an Option of an Employee continues following a Change
in Control, and an Optionee's employment is terminated without cause within
twelve (12) months following the consummation of the Change in Control, then the
Option vesting start date will be set back an additional twelve (12) months, so
that the Optionee is credited with an additional twelve (12) months of vesting.
For purposes of this Subsection 9(b) only, "cause" shall mean termination of
employment for (i) conduct materially detrimental to the employer, (ii)
conviction or plea of nolo contendere to a felony or (iii) any intentional
misconduct that the employer reasonably believes would make it impracticable for
the Employee to discharge substantially all of Employee's duties.
(c) Reservation of Rights. Except as provided in this Section 9, an
Optionee or Offeree shall have no rights by reason of (i) any subdivision or
consolidation of shares of stock of any class, (ii) the payment of any dividend,
or (iii) any other increase or decrease in the number of shares of stock of any
class. Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number of shares
of Common Stock subject to an Option, or the number of shares subject to any
other right to acquire Common Stock and/or the Exercise Price or Purchase Price.
The grant of an Option or other right to acquire Common Stock pursuant to the
Plan shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure, to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.
10. Legal Requirements.
(a) Restrictions on Issuance. Common Stock shall not be issued under the
Plan unless the issuance and delivery of such Common Stock complies with (or is
exempt from) all applicable requirements of law, including (without limitation)
the Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, state securities laws and regulations,
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<PAGE> 12
and the regulations of any stock exchange on which the Company's securities may
then be listed, and the Company has obtained the approval or favorable ruling
from any governmental agency that the Company determines is necessary or
advisable.
(b) Financial Reports. To the extent required to comply with the
California Corporations Code or the regulations thereunder, not less often than
annually the Company shall furnish to Optionees and Offerees Company summary
financial information including a balance sheet regarding the Company's
financial condition and results of operations, unless such Optionees or Offerees
have duties with the Company that assure them access to equivalent information.
Such financial statements need not be audited.
11. No Employment Rights.
No provision of the Plan, nor any Option granted or other right to
acquire Common Stock granted under the Plan, shall be construed to give any
person any right to become, to be treated as, or to remain an Employee,
Consultant or Non-Employee Director. The Company and its Subsidiaries reserve
the right to terminate any person's Service at any time and for any reason.
12. Duration and Amendments.
(a) Term of the Plan. The Plan, as set forth herein, shall become
effective on the date of its adoption by the Board, subject to the approval of
the Company's stockholders. In the event that the stockholders fail to approve
the Plan within twelve (12) months after its adoption by the Board, any Option
grants or other right to acquire Common Stock already made shall be null and
void, and no additional Option grants or other right to acquire Common Stock
shall be made after such date. The Plan shall terminate automatically ten (10)
years after its adoption by the Board and may be terminated on any earlier date
pursuant to Subsection (b) below.
(b) Right to Amend or Terminate the Plan. The Board may amend or
terminate the Plan at any time. Rights under any Option granted or other right
to acquire Common Stock granted before amendment of the Plan shall not be
materially altered, or impaired adversely, by such amendment, except with
consent of the Optionee or Offeree. An amendment of the Plan shall be subject to
the approval of the Company's stockholders only to the extent required by
applicable laws, regulations or rules.
(c) Effect of Amendment or Termination. No Common Stock shall be issued
or sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Common Stock previously issued or Option
previously granted under the Plan.
[the remainder of this page intentionally left blank]
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13. Execution.
To record the adoption of the Plan, the Company has caused its authorized
officer to execute the same.
PAGODA CORPORATION
By
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Title
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Date
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<PAGE> 1
EXHIBIT 99.2
PAGODA CORPORATION
1998 STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT
(WITH EXERCISE BEFORE VESTING PERMITTED)
Pagoda Corporation, a Delaware corporation (the "Company"), hereby
grants an option to purchase its Common Stock to the optionee named below. The
terms and conditions of the option are set forth in this Stock Option Agreement
and in the Company's 1998 Stock Incentive Plan (the "Plan").
I. GRANT INFORMATION
Date of Grant: __________, 199__
Name of Optionee:
Optionee's Social Security Number: ________-______-________
Type of Option: __ Incentive ("ISO")
---
__ Nonstatutory ("NSO")
---
Number of Shares of Common Stock: ___________
Exercise Price per Share: $__________
Vesting Start Date: __________, 199__
Vesting Schedule: Subject to attached Terms and
Conditions, the option shall vest as to
12/48ths of the shares on the first
anniversary of the Vesting Start Date and
shall vest as to 1/48th of the shares at
the end of each full month thereafter.
The option shall vest fully upon a Change
Of Control (as defined in the Plan).
BY SIGNING BELOW, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED
IN THIS STOCK OPTION AGREEMENT, INCLUDING THE ATTACHED TERMS AND
CONDITIONS, NOTICE OF EXERCISE AND PLAN.
Optionee:
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(Signature)
Company:
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(Signature)
Title:
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II. TERMS AND CONDITIONS
1. VESTING. Your option vests during your Service on the dates
specified in the first page of this Stock Option Agreement. Vesting will cease
if your Service terminates for any reason. Vesting may accelerate as provided in
the Plan or, if applicable, the first page of this Stock Option Agreement.
2. SERVICE; LEAVES OF ABSENCE. Your Service shall cease when you cease
to be actively employed by, or a consultant or adviser to, the Company (or any
subsidiary) as determined in the sole discretion of the Board. For purposes of
your option, your Service does not terminate when you go on a bona fide leave of
absence, that was approved by the Company in writing, if the terms of the leave
provide for continued service crediting, or when continued service crediting is
required by applicable law. However, for purposes of determining whether your
option is entitled to ISO status, your Service will be treated as terminating
ninety (90) days after you went on leave, unless your right to return to active
work is guaranteed by law or by a contract. Your Service terminates in any event
when the approved leave ends, unless you immediately return to active work. The
Company determines which leaves count toward Service, and when your Service
terminates for all purposes under the Plan.
3. TERM OF OPTION. Your option expires on the day before the 10th
anniversary of the Date of Grant, and will expire earlier if your Service
terminates as follows:
(a) REGULAR TERMINATION. If your Service terminates for any reason
except cause, death or Disability, then your option will expire at the close of
business at Company headquarters three (3) months after your termination date.
(b) CAUSE. If your Service terminates for cause (as defined by the
Company and consistent with applicable law), your option will expire
immediately.
(c) DEATH. If you die while in Service, then your option will expire at
the close of business at Company headquarters on the date six (6) months after
the date of death. During that six (6) month period, your estate or heirs may
exercise the vested portion of your option.
(d) DISABILITY. If your Service terminates because of your Disability,
then your option will expire at the close of business at Company headquarters on
the date six (6) months after your termination date. Disability shall have the
meaning set forth in section 22(e)(3) of the Code.
4. EXERCISE OF OPTION.
(a) LEGAL RESTRICTIONS. The Company will not permit you to exercise your
option if the issuance of Common Stock at that time would violate any law or
regulation. You represent and agree that the Common Stock to be acquired upon
exercising your option will be acquired for investment, and not with a view to
the sale or distribution thereof. If the sale of Common Stock under the Plan is
not registered under the Securities Act but an exemption is available which
requires an investment representation or other representation, you shall
represent and
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agree at the time of exercise to make such representations as are deemed
necessary or appropriate by the Company and its counsel.
(b) METHOD OF EXERCISE. To exercise your option, you must complete and
file the Company's "Notice of Exercise" form at the address given on the form,
together with full payment. The Notice of Exercise will be effective when it is
received by the Company. If someone else wants to exercise your option after
your death, that person must prove to the Company's satisfaction that he or she
is entitled to do so.
(c) FORM OF PAYMENT. When you submit a Notice of Exercise, you must
include payment of the aggregate Exercise Price for the Common Stock you are
purchasing. Payment may be made in one (or a combination) of the following
forms.
o A promissory note to the Company.
o Your personal check, a cashier's check or a money order.
o Your delivery of shares of Common Stock that have been owned by you
for at least six months (or such other period of time as may be
necessary to avoid adverse accounting consequences to the Company).
o To the extent that the Common Stock is publicly traded, your
delivery, on a form prescribed by the Company, of an irrevocable
direction to a securities broker approved by the Company to sell all
or part of the Common Stock and to deliver all or part of the sales
proceeds to the Company.
o To the extent that the Common Stock is publicly traded, your
delivery, on a form prescribed by the Company, of an irrevocable
direction to pledge all or part of the Common Stock to a securities
broker or lender approved by the Company, as security for a loan,
and to deliver all or part of the loan proceeds to the Company.
(d) WITHHOLDING TAXES. You will not be allowed to exercise your option
unless you make acceptable arrangements to pay any withholding or other taxes
that may be due as a result of the option exercise or the sale of Common Stock
acquired upon exercise of your option.
5. EXERCISE OF OPTION BEFORE VESTING ("EARLY EXERCISE"). You may
exercise your option before it is fully vested.
Common Stock received upon the exercise of the unvested portion of your
option shall be subject to the Company's right of repurchase, which right of
repurchase shall lapse at the rate and at such times the option would have
vested had there been no exercise. The Company's right of repurchase shall
terminate ninety (90) days after the later of (a) your Service termination or
(b) your date of exercise.
The certificates for the Common Stock subject to the Company's right of
repurchase shall be deposited in escrow with the Secretary of the Company to be
held as described herein. Each deposited certificate shall be accompanied by a
duly executed Assignment Separate from
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Certificate in the form attached. The deposited certificates, shall remain in
escrow until such time or times as the certificates are to be released or
otherwise surrendered for cancellation as discussed below.
All regular cash dividends on the Common Stock (or other securities at the
time held in escrow) shall be paid directly to you and shall not be held in
escrow. However, in the event of any stock dividend, stock split,
recapitalization or other change affecting the Company's outstanding Common
Stock as a class effected without receipt of consideration, any new, substituted
or additional securities or other property which is by reason of such
transaction distributed shall be immediately delivered to the Secretary of the
Company to be held in escrow hereunder, but only to the extent the Common Stock
is at the time subject to the escrow requirements hereof.
The Common Stock held in escrow hereunder shall be subject to the
following terms and conditions relating to their release from escrow or their
surrender to the Company for repurchase and cancellation:
o As your interest in the Common Stock vests, the certificates for
such vested Common Stock shall be released from escrow and delivered
to you, at your request, in accordance with the following schedule:
- The initial release of any vested Common Stock (or other
vested assets and securities) from escrow shall be effected
within thirty (30) days following the expiration of the
initial twelve (12) month period measured from the Vesting
Start Date.
- Subsequent releases of any vested Common Stock from escrow
shall be effected at annual intervals thereafter, with the
first such annual release to occur twenty-four (24) months
after the Vesting Start Date.
- Upon termination of your Service, any escrowed Common Stock in
which you are at the time vested shall be promptly released
from escrow.
o Should the Company exercise its right of repurchase with respect to
any unvested Common Stock held at the time in escrow hereunder, then
the escrowed certificates for such unvested Common Stock shall,
concurrently with the payment of the purchase price for such Common
Stock, be surrendered to the Company for cancellation, and you shall
have no further rights with respect to such Common Stock.
o Should the Company elect not to exercise its right of repurchase
with respect to any Common Stock held at the time in escrow
hereunder, then the escrowed certificates for such Common Stock
shall be surrendered to you.
6. RESALE RESTRICTIONS/MARKET STAND-OFF. In connection with any
underwritten public offering by the Company of its equity securities pursuant to
an effective registration statement filed under the Securities Act of 1933, as
amended, including the Company's initial
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public offering, you shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or agree to engage in any of the foregoing transactions with respect
to any Common Stock without the prior written consent of the Company or its
underwriters, for such period of time after the effective date of such
registration statement as may be requested by the Company or such underwriters,
not to exceed one hundred eighty (180) days. To enforce the provisions of this
paragraph, the Company may impose stop-transfer instructions with respect to the
Common Stock until the end of the applicable stand-off period. You may not sell
any Common Stock at a time when applicable laws, regulations or Company or
underwriter trading policies prohibit a sale.
7. RIGHT OF FIRST REFUSAL. If you propose to sell, pledge or otherwise
transfer to a third party any Common Stock acquired under this Stock Option
Agreement, or any interest in such Common Stock, the Company shall have the
"Right of First Refusal" with respect to all (and not less than all) of such
Common Stock. If you desire to transfer Common Stock acquired under this Stock
Option Agreement, you must give a written notice ("Transfer Notice") to the
Company describing fully the proposed transfer, including the number of shares
proposed to be transferred, the proposed transfer price and the name and address
of the proposed transferee. The Transfer Notice shall be signed both by you and
by the proposed new transferee and must constitute a binding commitment of both
parties to the transfer of the Common Stock. The Company shall have the right to
purchase all, and not less than all, of the Common Stock on the terms of the
proposal described in the Transfer Notice (subject, however, to any change in
such terms permitted in the next paragraph) by delivery of a notice of exercise
of the Right of First Refusal within thirty (30) days after the date when the
Transfer Notice was received by the Company.
If the Company fails to exercise its Right of First Refusal before or
within thirty (30) days after the date when it received the Transfer Notice, you
may, not later than ninety (90) days following receipt of the Transfer Notice by
the Company, conclude a transfer of the Common Stock subject to the Transfer
Notice on the terms and conditions described in the Transfer Notice. Any
proposed transfer on terms and conditions different from those described in the
Transfer Notice, as well as any subsequent proposed transfer by you, shall again
be subject to the Right of First Refusal and shall require compliance with the
procedure described in the paragraph above. If the Company exercises its Right
of First Refusal, the parties shall consummate the sale of the Common Stock on
the terms set forth in the Transfer Notice within sixty (60) days after the date
when the Company received the Transfer Notice (or within such longer period as
may have been specified in the Transfer Notice); provided, however, that if the
Transfer Notice provided that payment for the Common Stock was to be made in a
form other than lawful money paid at the time of transfer, the Company shall
have the option of paying for the Common Stock with lawful money equal to the
present value of the consideration described in the Transfer Notice.
The Company's Right of First Refusal shall inure to the benefit of its
successors and assigns, shall be freely assignable in whole or in part and shall
be binding upon any transferee of the Common Stock. The Company's right of First
Refusal shall terminate if the Company's Common Stock is listed on an
established stock exchange or is quoted regularly on the NASDAQ Stock Market.
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8. TRANSFER OF OPTION. Prior to your death, only you may exercise your
option. You cannot transfer or assign your option. For instance, you may not
sell your option or use it as security for a loan. If you attempt to do any of
these things, your option will immediately become invalid. You may, however,
dispose of your option in your will. Regardless of any marital property
settlement agreement, the Company is not obligated to honor a notice of exercise
from your spouse or former spouse, nor is the Company obligated to recognize
such individual's interest in your option in any other way.
9. NO RETENTION RIGHTS. Your option does not give you the right to be
retained by the Company (or any subsidiaries) in any capacity. The Company
reserves the right to terminate your Service at any time and for any reason.
10. SHAREHOLDER RIGHTS. You, or your estate or heirs, have no rights as
a shareholder of the Company until a certificate for your fully vested Common
Stock has been issued. No adjustments are made for dividends or other rights if
the applicable record date occurs before your stock certificate is issued,
except as described in the Plan.
11. ADJUSTMENTS TO COMMON STOCK. In the event of a stock split, a stock
dividend or a similar change in the Company's Common Stock, the number of shares
covered by your option and the exercise price per share may be adjusted pursuant
to the Plan. Your option shall be subject to the terms of the agreement of
merger or consolidation in the event the Company is subject to such corporate
activity, as described in the Plan.
12. LEGENDS. All certificates representing the Common Stock issued upon
exercise of your option shall, where applicable, have endorsed thereon any
legends required by applicable law, including the following legends:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE
WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE INITIAL
HOLDER HEREOF. SUCH AGREEMENT PROVIDES FOR CERTAIN TRANSFER RESTRICTIONS,
INCLUDING RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE
SECURITIES AND CERTAIN REPURCHASE RIGHTS IN FAVOR OF THE COMPANY UPON
TERMINATION OF SERVICE WITH THE COMPANY. THE SECRETARY OF THE COMPANY WILL
UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF
WITHOUT CHARGE."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE, AND MAY BE OFFERED AND SOLD ONLY IF
REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL
AND STATE SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT
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<PAGE> 7
REGISTRATION AND QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS ARE
NOT REQUIRED."
13. APPLICABLE LAW. This Agreement will be interpreted and enforced
under the laws of the State of California.
14. INCORPORATION OF PLAN BY REFERENCE. The text of the Plan is
incorporated in this Agreement by reference. Certain capitalized terms used in
this Agreement are defined in the Plan.
This Agreement and the Plan constitute the entire understanding between
you and the Company regarding your option. Any prior agreements, commitments or
negotiations concerning your option are superseded.
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