<PAGE> 1
As filed with the Securities and Exchange Commission on May _____, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
ISS GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 58-2362189
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
6600 PEACHTREE-DUNWOODY ROAD
EMBASSY ROW, BUILDING 300, SUITE 500
ATLANTA, GEORGIA 30328
(Address of principal executive offices) (Zip Code)
ISS GROUP, INC.
RESTATED 1995 STOCK INCENTIVE PLAN
OPTIONS GRANTED PURSUANT TO WRITTEN COMPENSATION AGREEMENTS
(Full title of the Plans)
THOMAS E. NOONAN
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
ISS GROUP, INC.
6600 PEACHTREE-DUNWOODY ROAD
EMBASSY ROW, BUILDING 300, SUITE 500
ATLANTA, GEORGIA 30328
(Name and address of Agent for service)
(678) 443-6000
(Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share Price Fee
---------- ------------- --------- ----- ---
<S> <C> <C> <C> <C>
ISS Group, Inc.
Restated 1995 Stock Incentive Plan
Common Stock $0.001 par value:
(Subject to outstanding options) 2,266,650 shares $ 6.74(2) $ 15,277,221(2) $ 4,506.78
(Available for future grant) 613,600 shares $41.22(3) $ 25,292,592(3) $ 7,461.32
Options Granted Pursuant to
Written Compensation Agreements
Common Stock $0.001 par value 100,000 shares $ 8.60(2) $ 860,000.00(2) $ 253.70
Aggregate Filing Fee $12,221.80
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the ISS Group, Inc. Restated
1995 Stock Incentive Plan and the options granted pursuant to Written
Compensation Agreements by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the
Registrant's receipt of consideration which results in an increase in
the number of the outstanding shares of the Registrant's Common Stock.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended (the "1933 Act"), on the basis of the
weighted average exercise price of the options.
(3) Calculated solely for purposes of this offering under Rule 457(h) of the
1933 Act, on the basis of the fair market value per share of the
Registrant's Common Stock on May 18, 1998, as reported on the Nasdaq
National Market.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
ISS Group, Inc. (the "Registrant") hereby incorporates by reference into
this Registration Statement the following documents previously filed with the
Securities and Exchange Commission (the "SEC"):
(a) The Registrant's prospectus filed with the SEC on March 24, 1998
under SEC Rule 424(b) in connection with Registrant's
Registration Statement No. 333-44529, in which there is set forth
the audited financial statements for the Registrant's fiscal year
ended December 31, 1997;
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1998, filed with the SEC on May 15,
1998; and
(c) The Registrant's Registration Statement No. 000-23655 on Form 8-A
filed with the SEC on March 13, 1998, in which there is described
the terms, rights and provisions applicable to the Registrant's
outstanding Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of
this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which de-registers all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any subsequently filed
document which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
Item 4. Description of Securities
Not Applicable.
Item 5. Interests of Named Experts and Counsel
Not Applicable.
Item 6. Indemnification of Directors and Officers
The Registrant's Charter limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except for liability for (i) any breach
of their duty of loyalty to the corporation or its stockholders, (ii) acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided in Section 174 of the Delaware General
Corporation Law, or (iv) any transaction from which the director derives an
improper personal benefit.
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The Registrant's Bylaws provide for the indemnification of directors and
officers to the fullest extent permitted by Delaware law, except if limited by
contract. The Company has entered into indemnification agreements with all of
its directors and its Chief Financial Officer, and has procured directors' and
officers' liability insurance. The Registrant believes that indemnification
under its Bylaws covers at least negligence and gross negligence on the part of
an indemnified party in connection with the defense of any action or proceeding
arising out of such party's status or service as a director, officer, employee
or other agent of the Company upon an undertaking by such party to repay such
advances if it is ultimately determined that such party is not entitled to
indemnification.
Item 7. Exemption from Registration Claimed
Not Applicable.
Item 8. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
4 Instruments Defining the Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 000-23655 on Form 8-A, and the
exhibits thereto, which are incorporated herein by reference pursuant to
Item 3(c).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-5 of this Registration
Statement.
99.1 ISS Group, Inc. Restated 1995 Stock Incentive Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
99.4 Form of Addendum to Stock Option Agreement (Limited Stock Appreciation
Right).
99.5 Form of Stock Issuance Agreement.
99.6 Form of Notice of Grant of Automatic Stock Option (Initial Grant).
99.7 Form of Notice of Grant of Automatic Stock Option (Annual Grant).
99.8 Form of Automatic Stock Option Agreement.
99.9 Form of Written Compensation Agreement.
99.10 Form of Notice of Grant of Stock Option for grants made pursuant to
Written Compensation Agreements.
99.11 Form of Stock Option Agreement for option grants made pursuant to
Written Compensation Agreements.
</TABLE>
Item 9. Undertakings
A. The undersigned Registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement (i) to include any prospectus required
by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts
or events arising after the effective date of this 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 this
Registration Statement and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement; provided, however, that clauses (1)(i) and (1)(ii) shall
not apply if the information required to be included in a post-effective
amendment by those clauses is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are
incorporated by reference into this Registration Statement; (2) that for the
purpose of determining any liability under the 1933 Act each such post-effective
amendment shall be deemed to be
II-2
<PAGE> 4
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; and (3) to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the Registrant's Restated 1995 Stock Incentive Plan
and/or the expiration of options granted to pursuant to Written Compensation
Agreements.
B. The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the 1933 Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
1934 Act that is incorporated by reference into this 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.
C. Insofar as indemnification for liabilities arising under
the 1933 Act may be permitted to directors, officers or controlling persons of
the Registrant pursuant to the indemnification provisions summarized in Item 6
or otherwise, the Registrant has been advised that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the 1933 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 1933 Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 5
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 Atlanta, State of Georgia on this 15th
day of May 1998.
ISS GROUP, INC.
By: /s/Thomas E. Noonan
------------------------------------------
Thomas E. Noonan
President, Chief Executive Officer and
Chairman of the Board of Directors
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of ISS Group, Inc., a
Delaware corporation, do hereby constitute and appoint Thomas E. Noonan and
Richard Macchia and each of them, the lawful attorneys-in-fact and agents with
full power and authority to do any and all acts and things and to execute any
and all instruments which said attorneys and agents, and any one of them,
determine may be necessary or advisable or required to enable said corporation
to comply with the Securities Act of 1933, as amended, and any rules or
regulations or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement, and to any and all instruments or documents filed as
part of or in conjunction with this Registration Statement or amendments or
supplements thereof, and each of the undersigned hereby ratifies and confirms
that all said attorneys and agents, or any one of them, shall do or cause to be
done by virtue hereof. This Power of Attorney may be signed in several
counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this
Power of Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/Thomas E. Noonan President, Chief Executive Officer
- ---------------------------------- and Chairman of the
Thomas E. Noonan Board of Directors May 15, 1998
(Principal Executive Officer)
/s/Christopher W. Klaus Director, Chief Technical Officer May 15, 1998
- ---------------------------------- and Secretary
Christopher W. Klaus
</TABLE>
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<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/Richard Macchia Vice President and Chief May 15, 1998
- ---------------------------------- Financial Officer
Richard Macchia (Principal Financial and
Accounting Officer)
/s/Richard S. Bodman Director May 15, 1998
- ----------------------------------
Richard S. Bodman
/s/Robert E. Davoli Director May 15, 1998
- ----------------------------------
Robert E. Davoli
/s/Kevin J. O'Connor Director May 15, 1998
- ----------------------------------
Kevin J. O'Connor
/s/David N. Strohm Director May 15, 1998
- ----------------------------------
David N. Strohm
</TABLE>
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<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
4 Instruments Defining the Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 000-23655 on Form 8-A, and the
exhibits thereto, which are incorporated herein by reference pursuant to
Item 3(b).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-5 of this Registration
Statement.
99.1 ISS Group, Inc. Restated 1995 Stock Incentive Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
99.4 Form of Addendum to Stock Option Agreement (Limited Stock Appreciation
Right).
99.5 Form of Stock Issuance Agreement.
99.6 Form of Notice of Grant of Automatic Stock Option (Initial Grant).
99.7 Form of Notice of Grant of Automatic Stock Option (Annual Grant).
99.8 Form of Automatic Stock Option Agreement.
99.9 Form of Written Compensation Agreement.
99.10 Form of Notice of Grant of Stock Option for grants made pursuant to
Written Compensation Agreements.
99.11 Form of Stock Option Agreement for option grants made pursuant to
Written Compensation Agreements.
</TABLE>
<PAGE> 1
EXHIBIT 5
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
May 20, 1998
ISS Group, Inc.
6600 Peachtree-Dunwoody Road
Embassy Row, Building 300, Suite 500
Atlanta, Georgia 30328
Re: ISS Group, Inc. - Registration Statement for Offering of
an Aggregate of 2,980,250 Shares of Common Stock
Dear Ladies and Gentlemen:
We refer to your registration on Form S-8 (the "Registration Statement")
under the Securities Act of 1933, as amended, of (i) 2,980,250 shares of Common
Stock of the Company available for issuance under the ISS Group, Inc. Restated
1995 Stock Incentive Plan ("the Plan") and (ii) an aggregate of 100,000 shares
of Common Stock of the Company to be issued pursuant to Written Compensation
Agreements. We advise you that, in our opinion, when such shares have been
issued and sold pursuant to the applicable provisions of the Plan and the
agreements for the options granted pursuant to Written Compensation Agreements
and in accordance with the Registration Statement, such shares will be validly
issued, fully paid and nonassessable shares of the Company's Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ BROBECK, PHLEGER & HARRISON LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the ISS Group, Inc. Restated 1995 Stock Incentive Plan and
Options Granted Pursuant to Written Compensation Agreements of ISS Group, Inc.
of our reports dated January 13, 1998, with respect to the consolidated
financial statements and schedule of ISS Group, Inc. for the year ended December
31, 1997 included in its Registration Statement (Form S-1) No. 333-44529) filed
with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Atlanta, Georgia
May 18, 1998
<PAGE> 1
EXHIBIT 99.1
ISS GROUP, INC.
RESTATED 1995 STOCK INCENTIVE PLAN
(Amended and Restated through December 4, 1997)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This Restated 1995 Stock Incentive Plan is intended to promote
the interests of ISS Group, Inc., a Delaware corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for them
to remain in the service of the Corporation.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three (3) separate equity programs:
(i) the Discretionary Option Grant Program under
which eligible persons may, at the discretion of the Plan Administrator,
be granted options to purchase shares of Common Stock,
(ii) the Stock Issuance Program under which eligible
persons may, at the discretion of the Plan Administrator, be issued
shares of Common Stock directly, either through the immediate purchase
of such shares or as a bonus for services rendered the Corporation (or
any Parent or Subsidiary), and
(iii) the Automatic Option Grant Program under which
eligible non-employee Board members shall automatically receive options
at periodic intervals to purchase shares of Common Stock.
B. The provisions of Articles One and Five shall apply to all equity
programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.
<PAGE> 2
III. ADMINISTRATION OF THE PLAN
A. Prior to the Section 12(g) Registration Date, the Plan shall be
administered by the Board.
B. Beginning with the Section 12(g) Registration Date, the Board shall
have the authority to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to Section 16 Insiders but may delegate such
authority in whole or in part to the Primary Committee. Administration of the
Plan with respect to all other persons eligible to participate may, at the
Board's discretion, be vested in the Primary Committee or a Secondary Committee,
or the Board may retain the power to administer the Plan with respect to all
such persons.
C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
D. Each Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority to establish such rules
and regulations as it may deem appropriate for proper administration of the Plan
and to make such determinations under, and issue such interpretations of, the
provisions of such Plan and any outstanding options or stock issuances
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the Plan or
any option or stock issuance thereunder.
E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
F. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of such program.
IV. ELIGIBILITY
A. Prior to the Section 12(g) Registration Date, only Employees shall be
eligible to participate in the Plan.
B. Beginning with the Section 12(g) Registration Date, the persons
eligible to participate in the Discretionary Option Grant and Stock issuance
Programs shall be as follows:
(i) Employees,
2.
<PAGE> 3
(ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
C. Only non-employee Board members shall be eligible to participate in
the Automatic Option Grant Program.
D. Each Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full authority (subject to the provisions of
the Plan) to determine, (i) with respect to the option grants under the
Discretionary Option Grant Program, which eligible persons are to receive option
grants, the time or times when such option grants are to be made, the number of
shares to be covered by each such grant, the status of the granted option as
either an Incentive Option or a Non-Statutory Option, the time or times at which
each option is to become exercisable, the vesting schedule (if any) applicable
to the option shares and the maximum term for which the option is to remain
outstanding and (ii) with respect to stock issuances under the Stock Issuance
Program, which eligible persons are to receive stock issuances, the time or
times when such issuances are to be made, the number of shares to be issued to
each Participant, the vesting schedule (if any) applicable to the issued shares
and the consideration to be paid for such shares.
E. The Plan Administrator shall have the absolute discretion either to
grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
V. STOCK SUBJECT TO THE PLAN
A. 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 over the term of the Plan shall not exceed 3,000,000
shares.
B. The number of shares of Common Stock available for issuance under the
Plan shall automatically increase on the first trading day of each calendar
year, beginning with the 1999 calendar year, by an amount equal to three percent
(3.0%) of the total number of shares of Common Stock outstanding on the last
trading day of the immediately preceding calendar year. No Incentive Options may
be granted on the basis of the additional shares of Common Stock resulting from
such annual increases.
C. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 300,000 shares of Common Stock per calendar year beginning with the
calendar year in which the Section 12(g) Registration Date occurs.
3.
<PAGE> 4
D. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation- regrant provisions of Article
Two. Unvested shares issued under the Plan and subsequently repurchased by the
Corporation at the original issue price paid per share pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan. However, should the exercise
price of an option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
corporation in satisfaction of the withholding taxes incurred in connection with
the exercise of an option or the vesting of a stock issuance under the Plan,
then the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is exercised
or which vest under the stock issuance, and not by the net number of shares of
Common Stock issued to the holder of such option or stock issuance.
E. Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the number and/or class of securities for which any one person may be
granted options, separately exercisable stock appreciation rights and direct
stock issuances per calendar year, (iii) the number and/or class of securities
for which grants are subsequently to be made under the Automatic Option Grant
Program to new and continuing non-employee Board members, and (iv) the number
and/or class of securities and the exercise price per share in effect under each
outstanding option in order to prevent the dilution or enlargement of benefits
thereunder. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.
4.
<PAGE> 5
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator and may be equal to, greater than or less than the Fair Market
Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon exercise
of the option and shall, subject to the provisions of Section I of Article Five
and the documents evidencing the option, be payable in cash or check made
payable to the Corporation. Should the Common Stock be registered under Section
12(g) of the 1934 Act at the time the option is exercised, then the exercise
price may also be paid as follows:
(i) in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(ii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable instructions
(A) to a Corporation-designated brokerage firm to effect the immediate
sale of the purchased shares and remit to the Corporation, out of the
sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchased shares plus
all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise
and (B) to the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan
5.
<PAGE> 6
Administrator and set forth in the documents evidencing the option grant.
However, no option shall have a term in excess of ten (10) years measured from
the option grant date.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(i) Should the Optionee cease to remain in Service
for any reason other than Permanent Disability or Misconduct, then the
Optionee shall have a period of three (3) months following the date of
such cessation of Service during which to exercise each outstanding
option held by such Optionee.
(ii) Should the Optionee's Service terminate by reason
of Permanent Disability, then the Optionee shall have a period of twelve
(12) months following the date of such cessation of Service during which
to exercise each outstanding option held by such Optionee.
(iii) If the Optionee dies while holding an outstanding
option, then the personal representative of his or her estate or the
person or persons to whom the option is transferred pursuant to the
Optionee's will or the laws of inheritance shall have a twelve
(12)-month period following the date of the Optionee's death to exercise
such option.
(iv) Under no circumstances, however, shall any such
option be exercisable after the specified expiration of the option term.
(v) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of the
applicable exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be outstanding for
any vested shares for which the option has not been exercised. However,
the option shall, immediately upon the Optionee's cessation of Service,
terminate and cease to be outstanding with respect to any and all option
shares for which the option is not otherwise at the time exercisable or
in which the Optionee is not otherwise at that time vested.
(vi) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to remain outstanding.
(vii) In the event of a Corporate Transaction or Change
in Control, the provisions of Section III of this Article Two shall
govern the
6.
<PAGE> 7
period for which outstanding options are to remain exercisable following
the Optionee's cessation of Service and shall supersede any provisions
to the contrary in this paragraph.
2. The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding, to:
(i) extend the period of time for which the option is
to remain exercisable following the Optionee's cessation of Service or
death from the limited period otherwise in effect for that option to
such greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term,
and/or
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but also
with respect to one or more additional installments in which the
Optionee would have vested under the option had the Optionee continued
in Service.
D. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory Option
may, in connection with the Optionee's estate plan, be assigned in whole or in
part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
E. STOCKHOLDER RIGHTS. The holder of an option shall have no stockholder
rights with respect to the shares subject to the option until such person shall
have exercised the option, paid the exercise price and become a holder of record
of the purchased shares.
F. UNVESTED SHARES. The Plan Administrator shall have the discretion to
grant options which are exercisable for unvested shares of Common Stock. Should
the Optionee cease Service while holding such unvested shares, the Corporation
shall have the right to repurchase, at the exercise price paid per share, any or
all of those unvested shares. The terms upon which such repurchase right shall
be exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be established by
the Plan Administrator and set forth in the document evidencing such repurchase
right.
7.
<PAGE> 8
G. FIRST REFUSAL RIGHTS. Until the Section 12(g) Registration Date, the
Corporation shall have the right of first refusal with respect to any proposed
disposition by the Optionee (or any successor in interest) of any shares of
Common Stock issued under the Plan. Such right of first refusal shall be
exercisable in accordance with the terms established by the Plan Administrator
and set forth in the document evidencing such right.
H. MARKET STAND-OFF. In connection with any underwritten public offering
by the Corporation of its equity securities pursuant to an effective
registration statement filed under the Securities Act of 1933, including the
Corporation's initial public offering, the Optionee may 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 otherwise agree to engage in any of
the foregoing transactions with respect to, any shares of Common Stock acquired
upon exercise of an option granted under the Plan without the prior written
consent of the Corporation or its underwriters. Such restriction (the "Market
Stand-Off") shall be in effect for such period of time from and after the
effective date of the final prospectus for the offering as may be requested by
the Corporation or such underwriters. The Optionee shall be required to execute
such agreements as the Corporation or the underwriters request in connection
with the Market Stand-Off.
I. FORFEITURE FOR COMPETITION. If, at any time while the Optionee
remains in Service or after the Optionee's termination of Service while the
option remains outstanding, the Optionee provides services to a competitor of
the Corporation (or any Parent or Subsidiary), whether as an employee, officer,
director, independent contractor, consultant, agent or otherwise, such services
being of a nature that can reasonably be expected to involve the skills and
experience used or developed by the Optionee while in the Corporation's Service,
then the Optionee's rights under any options outstanding under the Plan shall be
forfeited and terminated, subject to a determination to the contrary by the Plan
Administrator.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
the Plan shall be applicable to Incentive Options. Options which are
specifically designated as Non-Statutory Options shall not be subject to the
terms of this Section II.
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
B. EXERCISE PRICE. The exercise price per share shall not be less than
one hundred percent (100%) of the Fair Market Value per share of Common Stock on
the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares of
Common Stock (determined as of the respective date or dates of grant) for which
one or more options granted to any Employee under the Plan (or any other option
plan of the Corporation or any Parent or Subsidiary) may for the first time
become exercisable as Incentive Options during any one (1) calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000).
8.
<PAGE> 9
To the extent the Employee holds two (2) or more such options which become
exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.
D. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the option term shall not exceed five (5)
years measured from the option grant date and the exercise price per share of
the option shall be equal to at least one hundred ten percent (110%) of the Fair
Market Value per share of Common Stock on the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding option
shall automatically accelerate so that each such option shall, immediately prior
to the effective date of the Corporate Transaction, become fully exercisable for
all of the shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
However, an outstanding option shall NOT so accelerate if and to the extent: (i)
such option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation (or parent thereof) or to be replaced with
a comparable option to purchase shares of the capital stock of the successor
corporation (or parent thereof), (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the spread
existing on the unvested option shares at the time of the Corporate Transaction
and provides for subsequent payout in accordance with the same vesting schedule
applicable to such option or (iii) the acceleration of such option is subject to
other limitations imposed by the Plan Administrator at the time of the option
grant. The determination of option comparability under clause (i) above shall be
made by the Plan Administrator, and its determination shall be final, binding
and conclusive.
B. All outstanding repurchase rights shall also terminate automatically,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate Transaction,
all outstanding options shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).
D. If an outstanding option is assumed by the successor corporation (or
parent thereof) in connection with a Corporate Transaction, and the
Corporation's repurchase rights with respect to the unvested option shares are
assigned to such successor corporation (or parent thereof), and at the time of
or within twelve (12) months following such Corporate Transaction either (i) the
9.
<PAGE> 10
Optionee is offered a Lesser Position in replacement of the position held by him
or her immediately prior to the Corporate Transaction or (ii) the Optionee's
Service terminates by reason of an Involuntary Termination, then, effective as
of the date on which such Lesser Position is offered to the Optionee or the
effective date of such Involuntary Termination, respectively, the option shall
automatically accelerate in part so that, in addition to the number of vested
shares of Common Stock for which the option is exercisable at such time, the
option shall become exercisable with respect to the next annual installment of
option shares for which the option is scheduled to become exercisable in
accordance with the exercise schedule established for the option (and the
Corporation's repurchase rights shall automatically lapse with respect to such
option shares). Following such acceleration, to the extent the Optionee
continues in Service, the exercise schedule for the option shall be adjusted so
that the option shall become exercisable, with respect to each subsequent annual
installment of option shares under the original exercise schedule, on each
subsequent anniversary of the effective date of such option acceleration. In the
event that both the offer of a Lesser Position and a subsequent Involuntary
Termination of an Optionee's Service occur within twelve (12) months following a
Corporate Transaction, then acceleration of the option shares shall occur only
in connection with the offer of such Lesser Position and no additional
acceleration shall occur in connection with such subsequent Involuntary
Termination. Following an Involuntary Termination that occurs within twelve (12)
months following a Corporate Transaction, the option shall remain exercisable
for any or all of the vested option shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the one (1)-year period
measured from the effective date of the Involuntary Termination.
E. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction, (ii) the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same and (iii) the maximum number of securities
and/or class of securities for which any one person may be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuances under the Plan.
F. Notwithstanding Sections III.A., III.B. and III.D of this Article
Two, the Plan Administrator shall have the discretion, exercisable either at the
time the option is granted or at any time while the option remains outstanding,
to provide for the automatic acceleration of one or more outstanding options
(and the automatic termination of one or more outstanding repurchase rights with
the immediate vesting of the shares of Common Stock subject to those rights)
upon the occurrence of a Corporate Transaction, whether or not those options are
to be assumed or replaced (or those repurchase rights are to be assigned) in the
Corporate Transaction. The Plan Administrator shall also have the discretion to
grant options which do not accelerate whether or not such options are assumed
(and to provide for repurchase rights that do not terminate whether or not such
rights are assigned) in connection with a Corporate Transaction.
10.
<PAGE> 11
G. The Plan Administrator shall also have the discretion, exercisable at
the time the option is granted or at any time while the option remains
outstanding, to provide for the automatic acceleration, of any options which are
assumed or replaced in a Corporate Transaction and do not otherwise accelerate
at that time (and the termination of any of the Corporation's outstanding
repurchase rights which do not otherwise terminate at the time of the Corporate
Transaction) in the event that within twelve (12) months following the effective
date of such Corporate Transaction either (i) the Optionee should be offered a
Lesser Position in replacement of the position held by him or her immediately
prior to the Corporate Transaction or (ii) the Optionee's Service should
subsequently terminate by reason of an Involuntary Termination. Following an
Involuntary Termination that occurs within twelve (12) months following a
Corporate Transaction, any options accelerated under this Section III. G shall
remain exercisable for the vested option shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the one (1)-year period
measured from the effective date of the Involuntary Termination.
H. The Plan Administrator shall have the discretion, exercisable either
at the time the option is granted or at any time while the option remains
outstanding, to (i) provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights with the immediate vesting of the shares of Common Stock
subject to those rights) upon the occurrence of a Change in Control or (ii)
condition any such option acceleration (and the termination of any outstanding
repurchase rights) upon the occurrence of either of the following events within
a specified period (not to exceed twelve (12) months) following the effective
date of such Change in Control: (a) the offer to the Optionee of a Lesser
Position in replacement of the position held by him or her immediately prior to
the Change in Control or (b) the Involuntary Termination of the Optionee's
Service. Any options accelerated in connection with a Change in Control shall
remain fully exercisable until the expiration or sooner termination of the
option term; provided, however, that following an Involuntary Termination that
occurs within twelve (12) months following a Change in Control, any options
accelerated under this Section III.H shall remain exercisable for the vested
option shares until the earlier of (i) the expiration of the option term or (ii)
the expiration of the one (1)-year period measured from the effective date of
the Involuntary Termination.
I. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Non-Statutory Option under the Federal tax laws.
J. The grant of options under the Option Grant Program shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
11.
<PAGE> 12
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options covering the same or different number of
shares of Common Stock but with an exercise price per share based on the Fair
Market Value per share of Common Stock on the new option grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to grant
to selected Optionees tandem stock appreciation rights and/or limited stock
appreciation rights.
B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish, to
elect between the exercise of the underlying option for shares of Common
Stock and the surrender of that option in exchange for a distribution
from the Corporation in an amount equal to the excess of (a) the Fair
Market Value (on the option surrender date) of the number of shares in
which the Optionee is at the time vested under the surrendered option
(or surrendered portion thereof) over (b) the aggregate exercise price
payable for such shares.
(ii) No such option surrender shall be effective
unless it is approved by the Plan Administrator. If the surrender is so
approved, then the distribution to which the Optionee shall be entitled
may be made in shares of Common Stock valued at Fair Market Value on the
option surrender date, in cash, or partly in shares and partly in cash,
as the Plan Administrator shall in its sole discretion deem appropriate.
(iii) If the surrender of an option is rejected by the
Plan Administrator, then the Optionee shall retain whatever rights the
Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may exercise such rights at
any time prior to the later of (a) five (5) business days after the
receipt of the rejection notice or (b) the last day on which the option
is otherwise exercisable in accordance with the terms of the documents
evidencing such option, but in no event may such rights be exercised
more than ten (10) years after the option grant date.
C. The following terms shall govern the grant and exercise of limited
stock appreciation rights:
12.
<PAGE> 13
(i) One or more Section 16 Insiders may be granted
limited stock appreciation rights with respect to their outstanding
options.
(ii) Upon the occurrence of a Hostile Take-Over, each
such individual holding one or more options with such a limited stock
appreciation right shall have the unconditional right (exercisable for a
thirty (30)-day period following such Hostile Take-Over) to surrender
each such option to the Corporation, to the extent the option is at the
time exercisable for vested shares of Common Stock. In return for the
surrendered option, the Optionee shall receive a cash distribution from
the Corporation in an amount equal to the excess of (a) the Take-Over
Price of the shares of Common Stock which are at the time vested under
each surrendered option (or surrendered portion thereof) over (b) the
aggregate exercise price payable for such shares. Such cash distribution
shall be paid within five (5) days following the option surrender date.
(iii) The Plan Administrator shall pre-approve, at the
time the limited right is granted, the subsequent exercise of that right
in accordance with the terms of the grant and the provisions of this
Section V.C. No additional approval of the Plan Administrator or the
Board shall be required at the time of the actual option surrender and
cash distribution.
(iv) The balance of the option (if any) shall continue
in full force and effect in accordance with the documents evidencing
such option.
13.
<PAGE> 14
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.
A. PURCHASE PRICE.
1. The purchase price per share shall be fixed by the Plan
Administrator and may be less than, equal to or greater than the Fair Market
Value per share of Common Stock on the issue date.
2. Subject to the provisions of Section I of Article Four,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the
Corporation, or
(ii)past services rendered to the Corporation
(or any Parent or Subsidiary).
B. VESTING PROVISIONS.
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
14.
<PAGE> 15
3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase- money note of
the Participant attributable to such surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the
non-completion of the vesting schedule applicable to such shares. Such waiver
shall result in the immediate vesting of the Participant's interest in the
shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non- attainment of the applicable performance
objectives.
C. FIRST REFUSAL RIGHTS. Until the Section 12(g) Registration Date, the
Corporation shall have the right of first refusal with respect to any proposed
disposition by the Participant (or any successor in interest) of any shares of
Common Stock issued under the Stock Issuance Program. Such right of first
refusal shall be exercisable in accordance with the terms established by the
Plan Administrator and set forth in the document evidencing such right.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights under the
Stock Issuance Program shall terminate automatically, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Corporate Transaction, except to the extent (i) those
repurchase rights are assigned to the successor corporation (or parent thereof)
in connection with such Corporate Transaction or (ii) such accelerated vesting
is precluded by other limitations imposed in the Stock Issuance Agreement.
B. Notwithstanding Section II.A. of this Article Three, the Plan
Administrator shall have the discretionary authority, exercisable either at the
time the unvested shares are issued or any time while the Corporation's
repurchase rights remain outstanding under the Stock Issuance Program, to
provide that those rights shall automatically terminate in whole or in part, and
the shares of Common Stock subject to those terminated rights shall immediately
vest, in the event
15.
<PAGE> 16
of a Corporate Transaction, whether or not those repurchase rights are to be
assigned to the successor corporation (or its parent) in connection with such
Corporate Transaction. The Plan Administrator shall also have the discretion to
provide for repurchase rights with terms different from those in effect under
this Section II in connection with a Corporate Transaction.
C. The Plan Administrator shall have the discretion, exercisable either
at the time the unvested shares are issued or at any time while the
Corporation's repurchase rights remain outstanding, to provide that any
repurchase rights that are assigned in the Corporate Transaction shall
automatically terminate, and the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event that either of
the following events should occur either at the time of or within a specified
period (not to exceed twelve (12) months) following the effective date of the
Corporate Transaction: (a) the Participant is offered a Lesser Position in
replacement of the position held by him or her immediately prior to the
Corporate Transaction or (b) the Participant's Service terminates by reason of
an Involuntary Termination.
D. The Plan Administrator shall have the discretion, exercisable either
at the time the unvested shares are issued or at any time while the
Corporation's repurchase right remains outstanding, to (i) provide for the
automatic termination of one or more outstanding repurchase rights and the
immediate vesting of the shares of Common Stock subject to those rights upon the
occurrence of a Change in Control or (ii) condition any such accelerated vesting
upon the occurrence of either of the following events at the time of or within a
specified period (not to exceed twelve (12) months) following the effective date
of such Change in Control: (a) the Participant is offered a Lesser Position in
replacement of the position held by him or her immediately prior to the Change
in Control or (b) the Involuntary Termination of the Participant's Service.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be
held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.
IV. MARKET STAND-OFF
In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the Securities Act of 1933, including the Corporation's
initial public offering, the Participant may 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 otherwise agree to engage in any of the
foregoing transactions with respect to, any shares of Common Stock acquired
under the Plan without the prior written consent of the Corporation or its
underwriters. Such restriction (the "Market Stand-Off") shall be in effect for
such period of time from and after the effective date of the final prospectus
for the offering as may be requested by the Corporation or such underwriters.
The Participant shall be
16.
<PAGE> 17
required to execute such agreements as the Corporation or the underwriters
request in connection with the Market Stand-Off.
17.
<PAGE> 18
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Options shall be made on the dates specified below:
1. Each individual who is first elected or appointed as a
non-employee Board member on or at any time after the Underwriting Date shall
automatically be granted, on the date of such initial election or appointment, a
Non-Statutory Option to purchase 50,000 shares of Common Stock, provided that
individual has not previously been in the employ of the Corporation or any
Parent or Subsidiary.
2. On the date of each Annual Stockholders Meeting held after the
Underwriting Date, each individual who is to continue to serve as a non-employee
Board member, whether or not that individual is standing for re-election to the
Board, shall automatically be granted a Non-Statutory Option to purchase 5,000
shares of Common Stock, provided such individual has served as a non-employee
Board member for at least six (6) months.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10) years measured
from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be immediately
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares. Each initial 50,000-share option shall vest,
and the Corporation's repurchase right shall lapse, in a series of four (4)
successive equal annual installments upon the Optionee's completion of each year
of Board service over the four (4)-year period measured from the option grant
date. Each annual 5,000-share option shall vest, and the Corporation's
repurchase right shall lapse, in a series of two (2) successive equal annual
installments upon the Optionee's completion of each year of Board service over
the two (2)-year period measured from the option grant date.
18.
<PAGE> 19
E. CESSATION OF BOARD SERVICE. The following provisions shall govern the
exercise of any options outstanding at the time of the Optionee's cessation of
Board service:
(i) The Optionee (or, in the event of Optionee's
death, the personal representative of the Optionee's estate or the
person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and
distribution) shall have a twelve (12)-month period following the date
of such cessation of Board service in which to exercise each such
option.
(ii) During the twelve (12)-month exercise period, the
option may not be exercised in the aggregate for more than the number of
vested shares of Common Stock for which the option is exercisable at the
time of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all shares at
the time subject to the option shall immediately vest so that such
option may, during the twelve (12)-month exercise period following such
cessation of Board service, be exercised for all or any portion of those
shares as fully-vested shares of Common Stock.
(iv) In no event shall the option remain exercisable
after the expiration of the option term. Upon the expiration of the
twelve (12)-month exercise period or (if earlier) upon the expiration of
the option term, the option shall terminate and cease to be outstanding
for any vested shares for which the option has not been exercised.
However, the option shall, immediately upon the Optionee's cessation of
Board service for any reason other than death or Permanent Disability,
terminate and cease to be outstanding to the extent the option is not
otherwise at that time exercisable for vested shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common Stock
at the time subject to each outstanding option but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become fully exercisable for
all of the shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of those shares as fully-vested shares of
Common Stock. Immediately following the consummation of the Corporate
Transaction, each automatic option grant shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
19.
<PAGE> 20
B. In connection with any Change in Control, the shares of Common Stock
at the time subject to each outstanding option but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to
the effective date of the Change in Control, become fully exercisable for all of
the shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of those shares as fully-vested shares of
Common Stock. Each such option shall remain exercisable for such fully-vested
option shares until the expiration or sooner termination of the option term or
the surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a
thirty (30)-day period in which to surrender to the Corporation each of his or
her outstanding automatic option grants. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same.
E. The grant of options under the Automatic Option Grant Program shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for options made under
the Discretionary Option Grant Program.
20.
<PAGE> 21
ARTICLE FIVE
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to
pay the option exercise price under the Discretionary Option Grant Program or
the purchase price of shares issued under the Stock Issuance Program by
delivering a full-recourse, interest bearing promissory note payable in one or
more installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares (less the par value, if
any, of those shares) plus (ii) any Federal, state and local income and
employment tax liability incurred by the Optionee or the Participant in
connection with the option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of options or upon the issuance or vesting of such shares under the
Plan shall be subject to the satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan with the right to use shares of Common Stock in satisfaction of all or part
of the Taxes incurred by such holders in connection with the exercise of their
options or the vesting of their shares. Such right may be provided to any such
holder in either or both of the following formats:
(i) Stock Withholding: The election to have the
Corporation withhold, from the shares of Common Stock otherwise issuable
upon the exercise of such Non-Statutory Option or the vesting of such
shares, a portion of those shares with an aggregate Fair Market Value
equal to the percentage of the Taxes (not to exceed one hundred percent
(100%)) designated by the holder.
(ii) Stock Delivery: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised or the
shares vest, one or more shares of Common Stock previously acquired by
such holder (other than in connection with the option exercise or share
vesting triggering the Taxes) with an aggregate Fair Market Value equal
to the percentage of the Taxes (not to exceed one hundred percent
(100%)) designated by the holder.
21.
<PAGE> 22
III. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan became effective when adopted by the board of directors of
Internet Security Systems, Inc., a Georgia Corporation, (the "Predecessor
Corporation") on September 6, 1995 and was approved by the stockholders of the
Predecessor Corporation on January 31, 1996. Effective as of February 28, 1997,
the board of directors of the Predecessor Corporation restated, subject to
approval by the stockholders, the Plan to make the following changes: (i) to
re-name the Plan the "Restated 1995 Stock Incentive Plan", (ii) to increase the
number of shares of the Predecessor Corporation's common stock available for
issuance thereunder by 600,000 shares from 948,029 to 1,548,029 shares, (iii) to
add the Stock Issuance Program, (iv) to give the Plan Administrator additional
discretion to structure options as immediately exercisable options, subject to
repurchase at the option exercise price paid per share, (v) to give the Plan
Administrator additional discretion to provide for the accelerated vesting of
options or issued shares of Common Stock in connection with a Corporate
Transaction or Change in Control or upon either (a) the offer to an Optionee or
Participant of a Lesser Position or (b) the Involuntary Termination of an
Optionee or Participant's Service following such Corporate Transaction or Change
in Control and (vi) to incorporate certain features which would be appropriate
after the Section 12(g) Registration Date including, in particular the power to
grant stock appreciation rights, certain amendments to the administrative
provisions of the Plan to comply with applicable Federal securities and tax laws
and the imposition of a 300,000-share limit on the number of shares which may be
awarded to any individual under the Plan after the Section 12(g) Registration
Date, as required by Section 162(m) of the Code.
The provisions of the February 28, 1997 restatement of the Plan
shall apply only to options granted and stock issuances made under the Plan from
and after February 28, 1997. All options outstanding under the Plan at the time
of the February 28, 1997 restatement shall continue to be governed by the terms
and conditions of the Plan (and the respective instruments evidencing each such
option) as in effect on the date each such option was granted; provided,
however, that one or more provisions of the restated Plan, may, in the Plan
Administrator's discretion, be extended to one or more such options.
B. On December 3, 1997, in connection with incorporation of the
Corporation, the Plan was assumed by the Corporation and each option outstanding
thereunder was assumed by the Corporation and converted into an option to
purchase shares of the Corporation's Common Stock on a 1-for-1 basis, at the
original option exercise price per share and subject to the original terms and
conditions of each such option. Also on December 3, 1997, the Board, in
anticipation of the initial public offering of the Common Stock and subject to
approval by the Corporation's stockholders, further amended the Plan to (i)
render non-employee Board members and consultants and independent advisors
eligible to receive option grants under the Plan after the Section 12(g)
Registration Date, (ii) add the Automatic Option Grant Program, (iii) increase
the number of shares of Common Stock issuable under the Plan from 1,548,029 to
3,000,000 shares and (iv) provide for an automatic annual increase in the total
number of shares of Common Stock authorized for issuance under the Plan.
22.
<PAGE> 23
C. The Plan shall terminate upon the earliest of (i) September 6, 2005,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued as vested shares or (iii) the termination of all outstanding
options in connection with a Corporate Transaction. All options and unvested
stock issuances outstanding at that time under the Plan shall continue to have
full force and effect in accordance with the provisions of the documents
evidencing such options or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws and regulations.
B. Options may be granted under the Discretionary Option Grant Program
and shares may be issued under the Stock Issuance Program which are in each
instance in excess of the number of shares of Common Stock then available for
issuance under the Plan, provided any excess shares actually issued under those
programs shall be held in escrow until there is obtained stockholder approval of
an amendment sufficiently increasing the number of shares of Common Stock
available for issuance under the Plan. If such stockholder approval is not
obtained within twelve (12) months after the date the first such excess
issuances are made, then (i) any unexercised options granted on the basis of
such excess shares shall terminate and cease to be outstanding and (ii) the
Corporation shall promptly refund to the Optionees and the Participants the
exercise or purchase price paid for any excess shares issued under the Plan and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow, and such shares shall
thereupon be automatically cancelled and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VI. WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock
upon the exercise of any options or upon the vesting of any shares issued under
the Plan shall be subject to the satisfaction of all applicable Federal, state
and local income and employment tax withholding requirements.
23.
<PAGE> 24
VII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any options under the
Plan and the issuance of any shares of Common Stock (i) upon the exercise of any
option or (ii) under the Stock Issuance Program shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it and
the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws and all
applicable listing requirements of any stock exchange (or the Nasdaq National
Market, if applicable) on which Common Stock is then listed for trading.
VIII. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
24.
<PAGE> 25
APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
program in effect under the Plan.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any person
or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's stockholders, or
(ii) a change in the composition of the Board over a period
of thirty-six (36) consecutive months or less such that a majority of
the Board members ceases, by reason of one or more contested elections
for Board membership, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of such period or
(B) have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (A) who were still in office at the time the Board approved such
election or nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMITTEE shall mean a committee of one (1) or more Board members
appointed by the Board to exercise one or more administrative functions under
the Plan.
F. COMMON STOCK shall mean the Corporation's common stock.
G. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(a) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different
A-1.
<PAGE> 26
from the persons holding those securities immediately prior to such
transaction, or
(b) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
H. CORPORATION shall mean ISS Group, Inc., a Delaware corporation.
I. DISCRETIONARY OPTION GRANT PROGRAM shall mean the option grant
program in effect under the Plan.
J. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
K. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
L. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(a) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price
is reported by the National Association of Securities Dealers on the
Nasdaq National Market. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(b) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape
of transactions on such exchange. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which
such quotation exists.
(c) For purposes of any option grants made on the
Underwriting Date, the Fair Market Value shall be deemed to be equal to
the price per share at which the Common Stock is sold in the initial
public offering pursuant to the Underwriting Agreement.
A-2.
<PAGE> 27
(d) For purposes of any option grants made prior to the
Underwriting Date, the Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.
M. HOSTILE TAKE-OVER shall mean the acquisition, directly or indirectly,
by any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
N. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
O. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
P. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
(a) such individual's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or
(b) such individual's voluntary resignation following the
offer to such individual of a Lesser Position in replacement of the
position held by him or her immediately prior to the Corporate
Transaction or Change in Control.
Q. LESSER POSITION for an Optionee or Participant shall mean a new
position or a change in the Optionee or Participant's position which, compared
with such individual's position with the Corporation immediately prior to the
Corporate Transaction or Change in Control, (i) offers a lower level of
compensation (including base salary, fringe benefits and target bonuses under
any corporate-performance based bonus or incentive programs), or (ii) materially
reduces such individual's duties or level of responsibility.
R. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
A-3.
<PAGE> 28
S. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
T. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
U. OPTIONEE shall mean any person to whom an option is granted under the
Plan.
V. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
W. PARTICIPANT shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.
X. PERMANENT DISABILITY or PERMANENTLY DISABLED shall mean the inability
of the Optionee or the Participant to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more. However, solely for purposes of the Automatic Option Grant Program,
Permanent Disability or Permanently Disabled shall mean the inability of the
non-employee Board member to perform his or her usual duties as a Board member
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.
Y. PLAN shall mean the Corporation's Restated 1995 Stock Incentive Plan,
as set forth in this document.
Z. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Option Grant and Stock Issuance Programs with respect to one or
more classes of eligible persons, to the extent such entity is carrying out its
administrative functions under those programs with respect to the persons under
its jurisdiction.
AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the Option Grant
and Stock Issuance Programs with respect to Section 16 Insiders.
AB. SECONDARY COMMITTEE shall mean a committee of one (1) or more Board
members appointed by the Board to administer the Option Grant and Stock Issuance
Programs with respect to eligible persons other than Section 16 Insiders.
AC. SECTION 12(g) REGISTRATION DATE shall mean the date on which the
Common Stock is first registered under Section 12(g) of the 1934 Act.
A-4.
<PAGE> 29
AD. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
AE. SERVICE shall mean the provision of services to the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant.
AF. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
AG. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by
the Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
AH. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
effect under the Plan.
AI. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
AJ. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
AK. TAXES shall mean the Federal, state and local income and employment
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options or the
vesting of those shares.
AL. 10% STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
AM. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
AN. UNDERWRITING DATE shall mean the date on which the Underwriting
Agreement is executed and the initial public offering price of the Common Stock
is established.
A-5.
<PAGE> 1
EXHIBIT 99.2
ISS GROUP, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of ISS Group, Inc. (the
"Corporation"):
Optionee:_______________________________________________________
Grant Date:_____________________________________________________
Vesting Commencement Date:______________________________________
Exercise Price: $________ per share
Number of Option Shares:____________ shares of Common Stock
Expiration Date:________________________________________________
Type of Option: _____ Incentive Stock Option
_____ Non-Statutory Stock Option
Date Exercisable: The Option shall become exercisable with
respect to twenty five percent (25%) of the Option Shares upon
Optionee's completion of each of the four (4) years of Service
measured from and after the Vesting Commencement Date, with the
first such installment to become exercisable on the first
anniversary of the Vesting Commencement Date. In no event shall
the Option become exercisable for any additional Option Shares
after Optionee's cessation of Service.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the ISS Group, Inc. Restated 1995
Stock Incentive Plan (the "Plan"). Optionee further agrees to be bound by the
terms of the Plan and the terms of the Option as set forth in the Stock Option
Agreement and any Addenda to such Stock Option Agreement attached hereto as
Exhibit A. A copy of the Plan is available upon request made to the Corporate
Secretary at the Corporation's principal offices.
No Employment or Service Contract. Nothing in this Notice or in
the attached Stock Option Agreement or Plan shall confer upon Optionee any right
to continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason, with or without cause.
<PAGE> 2
Definitions. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
DATED: ___________ , 199_
ISS GROUP, INC.
By:_________________________________________
Title:______________________________________
____________________________________________
OPTIONEE
Address:____________________________________
____________________________________________
ATTACHMENTS:
EXHIBIT A - STOCK OPTION AGREEMENT AND ADDENDA
2.
<PAGE> 1
EXHIBIT 99.3
ISS GROUP, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or the board
of directors of any Parent or Subsidiary and consultants and other independent
advisors who provide services to the Corporation (or any Parent or Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. During the lifetime of Optionee,
Incentive Options shall be exercisable only by Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following Optionee's death. However, a Non-Statutory Option may, in
connection with Optionee's estate plan, be assigned in whole or in part during
Optionee's lifetime to one or more members of Optionee's immediate family or to
a trust established exclusively for one or more such family members. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem appropriate.
4. DATES OF EXERCISE. This option shall become exercisable for
the Option Shares in one or more installments as specified in the Grant Notice.
As the option becomes exercisable for such installments, those installments
shall accumulate and the option shall remain
<PAGE> 2
exercisable for the accumulated installments until the Expiration Date or sooner
termination of the option term under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(a) Should Optionee cease to remain in Service for any
reason (other than death, Permanent Disability or Misconduct) while this option
is outstanding, then Optionee shall have a period of three (3) months
(commencing with the date of such cessation of Service) during which to exercise
this option, but in no event shall this option be exercisable at any time after
the Expiration Date.
(b) Should Optionee die while this option is outstanding,
then the personal representative of Optionee's estate or the person or persons
to whom the option is transferred pursuant to Optionee's will or in accordance
with the laws of inheritance shall have the right to exercise this option. Such
right shall lapse, and this option shall cease to be outstanding, upon the
earlier of (i) the expiration of the twelve (12)-month period measured from the
date of Optionee's death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Permanent
Disability while this option is outstanding, then Optionee shall have a period
of twelve (12) months (commencing with the date of such cessation of Service)
during which to exercise this option. In no event shall this option be
exercisable at any time after the Expiration Date.
(d) During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for more than
the number of Option Shares for which the option is exercisable at the time of
Optionee's cessation of Service. Upon the expiration of such limited exercise
period or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding for any Option Shares for which the option has not been
exercised. However, upon Optionee's cessation of Service, this option shall
immediately terminate and cease to be outstanding with respect to any Option
Shares for which the option is not exercisable at that time.
(e) Should Optionee's Service be terminated for
Misconduct, then this option shall terminate immediately and cease to remain
outstanding.
(f) In the event of a Corporate Transaction, the
provisions of Paragraph 6 shall govern the period for which this option is to
remain exercisable following Optionee's cessation of Service and shall supersede
any provisions to the contrary in this paragraph.
2.
<PAGE> 3
6. ACCELERATED VESTING.
(a) In the event of any Corporate Transaction, this
option, to the extent outstanding at that time, but not fully exercisable, shall
automatically accelerate in full so that this option shall, immediately prior to
the effective date of the Corporate Transaction, become fully exercisable for
any or all of those Option Shares at the time subject to this option as fully-
vested shares of Common Stock. However, no such acceleration of this option
shall occur if and to the extent: (i) this option is assumed by the successor
corporation (or parent thereof) in the Corporate Transaction or (ii) this option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the Option Shares for which this option
is not otherwise exercisable at the time of the Corporate Transaction (the
excess of the Fair Market Value of those Option Shares over the Exercise Price
payable for such shares) and provides for subsequent payout in accordance with
the same exercise schedule in effect for the option pursuant to the Exercise
Schedule as set forth in the Grant Notice.
(b) Immediately following the Corporate Transaction, this
option shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof) in connection with the
Corporate Transaction.
(c) If this option is assumed by the successor corporation
(or parent thereof) in a Corporate Transaction, and at the time of, or within
twelve (12) months following such Corporate Transaction, either (i) Optionee is
offered a Lesser Position in replacement of the position held by him or her
immediately prior to the Corporate Transaction or (ii) Optionee's Service
terminates by reason of an Involuntary Termination, then, effective as of the
date on which such Lesser Position is offered to Optionee or the effective date
of such Involuntary Termination, respectively, this option, to the extent
outstanding at that time but not fully exercisable shall automatically
accelerate in part so that this option shall immediately become exercisable for
the next annual installment of Option Shares for which this option is scheduled
to become exercisable in accordance with the Exercise Schedule set forth in the
Grant Notice. Following such acceleration, to the extent Optionee continues in
Service, the Exercise Schedule shall be adjusted so that this option shall
become exercisable for the remaining annual installments of Option Shares (which
were otherwise to become exercisable on the subsequent anniversaries of the
Vesting Commencement Date) on each subsequent anniversary of the effective date
of such acceleration. Following an Involuntary Termination, this option shall
remain exercisable for any or all of the vested Option Shares until the earlier
of (i) the expiration of the option term or (ii) the expiration of the one
(1)-year period measured from the effective date of the Involuntary Termination.
(d) If this option is assumed in connection with a
Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and class
of securities which would have been issuable to Optionee in consummation of such
Corporate Transaction had the option been exercised immediately prior to such
Corporate Transaction, and appropriate adjustments shall also be made to the
Exercise Price, provided the aggregate Exercise Price shall remain the same.
3.
<PAGE> 4
(e) This Agreement shall not in any way affect the right
of the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. STOCKHOLDER RIGHTS. The holder of this option shall not have
any stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all
or any part of the Option Shares for which this option is at the time
exercisable, Optionee (or any other person or persons exercising the option)
must take the following actions:
(i) Execute and deliver to the Corporation a
Notice of Exercise for the Option Shares for which the option is
exercised.
(ii) Pay the aggregate Exercise Price for the
purchased shares in one or more of the following forms:
(A) cash or check made payable to the
Corporation;
(B) a promissory note payable to the
Corporation, but only to the extent authorized by the Plan
Administrator in accordance with Paragraph 14;
(C) in shares of Common Stock held by
Optionee (or any other person or persons exercising the option)
for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date; or
(D) through a special sale and remittance
procedure pursuant to which Optionee (or any other person or
persons exercising the option) shall concurrently provide
irrevocable instructions
4.
<PAGE> 5
(a) to a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such
exercise and (b) to the Corporation to deliver the certificates
for the purchased shares directly to such brokerage firm in
order to complete the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise delivered to the
Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option
(if other than Optionee) have the right to exercise this option.
(iv) Make appropriate arrangements with the
Corporation (or Parent or Subsidiary employing or retaining
Optionee) for the satisfaction of all Federal, state and local
income and employment tax withholding requirements applicable to
the option exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any
fractional shares.
10. FORFEITURE FOR COMPETITION. If, at any time while Optionee
remains in Service or after Optionee's termination of Service while this option
remains outstanding, Optionee provides services to a competitor of the
Corporation, whether as an employee, officer, director, independent contractor,
consultant, agent or otherwise, such services being of a nature that can
reasonably be expected to involve the skills and experience used or developed by
Optionee while in the Corporation's Service, then Optionee's rights under this
option shall be forfeited and terminated, subject to a determination to the
contrary by the Plan Administrator.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the Nasdaq
National Market, if applicable) on which the Common Stock may be listed for
trading at the time of such exercise and issuance.
5.
<PAGE> 6
(b) The inability of the Corporation to obtain approval
from any regulatory body having authority deemed by the Corporation to be
necessary to the lawful issuance and sale of any Common Stock pursuant to this
option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained. The Corporation, however, shall use its best efforts to
obtain all such approvals.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise
provided in Paragraphs 3 and 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns and the legal representatives, heirs
and legatees of Optionee's estate.
13. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
14. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse,
interest-bearing promissory note secured by those Option Shares. The payment
schedule in effect for any such promissory note shall be established by the Plan
Administrator in its sole discretion.
15. CONSTRUCTION. This Agreement and the option evidenced hereby
are made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
16. GOVERNING LAW. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
Georgia without resort to that State's conflict-of-laws rules.
17. STOCKHOLDER APPROVAL. If the Option Shares covered by this
Agreement exceed, as of the Grant Date, the number of shares of Common Stock
which may be issued under the Plan as last approved by the stockholders, then
this option shall be void with respect to such excess shares, unless stockholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock issuable under the Plan is obtained in accordance with the provisions of
the Plan.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the
event this option is designated an Incentive Option in the Grant Notice, the
following terms and conditions
6.
<PAGE> 7
shall also apply to the grant:
(a) This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is exercised
for one or more Option Shares: (i) more than three (3) months after the date
Optionee ceases to be an Employee for any reason other than death or Permanent
Disability or (ii) more than twelve (12) months after the date Optionee ceases
to be an Employee by reason of Permanent Disability.
(b) No installment under this option shall qualify for
favorable tax treatment as an Incentive Option if (and to the extent) the
aggregate Fair Market Value (determined at the Grant Date) of the Common Stock
for which such installment first becomes exercisable hereunder would, when added
to the aggregate value (determined as of the respective date or dates of grant)
of any earlier installments of the Common Stock and any other securities for
which this option or any other Incentive Options granted to Optionee prior to
the Grant Date (whether under the Plan or any other option plan of the
Corporation or any Parent or Subsidiary) first become exercisable during the
same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the
aggregate. Should such One Hundred Thousand Dollar ($100,000) limitation be
exceeded in any calendar year, this option shall nevertheless become exercisable
for the excess shares in such calendar year as a Non-Statutory Option.
(c) Should the exercisability of this option be
accelerated upon a Corporate Transaction, then this option shall qualify for
favorable tax treatment as an Incentive Option only to the extent the aggregate
Fair Market Value (determined at the Grant Date) of the Common Stock for which
this option first becomes exercisable in the calendar year in which the
Corporate Transaction occurs does not, when added to the aggregate value
(determined as of the respective date or dates of grant) of the Common Stock or
other securities for which this option or one or more other Incentive Options
granted to Optionee prior to the Grant Date (whether under the Plan or any other
option plan of the Corporation or any Parent or Subsidiary) first become
exercisable during the same calendar year, exceed One Hundred Thousand Dollars
($100,000) in the aggregate. Should the applicable One Hundred Thousand Dollar
($100,000) limitation be exceeded in the calendar year of such Corporate
Transaction, the option may nevertheless be exercised for the excess shares in
such calendar year as a Non-Statutory Option.
(d) Should Optionee hold, in addition to this option, one
or more other options to purchase Common Stock which become exercisable for the
first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.
7.
<PAGE> 8
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify ISS Group, Inc. (the "Corporation") that I elect
to purchase _______ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $ _______per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me under the
Corporation's Restated 1995 Stock Incentive Plan on , 199 .
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.
, 199
- -------------------------------
Date
------------------------------------------
Optionee
Address:
---------------------------------
------------------------------------------
Print name in exact manner
it is to appear on the
stock certificate:
------------------------------------------
Address to which certificate
is to be sent, if different
from address above:
------------------------------------------
------------------------------------------
Social Security Number:
------------------------------------------
Employee Number:
------------------------------------------
<PAGE> 9
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. CORPORATION shall mean ISS Group, Inc., a Georgia corporation.
G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price payable per Option Share
as specified in the Grant Notice.
J. EXERCISE SCHEDULE shall mean the exercise schedule specified in the
Grant Notice pursuant to which the option is to become exercisable in a series
of installments over Optionee's period of Service.
K. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
A-1.
<PAGE> 10
L. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as the price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape
of transactions on such exchange. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which
such quotation exists.
M. GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.
N. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
O. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
P. INVOLUNTARY TERMINATION shall mean the termination of Optionee's
Service which occurs by reason of:
(i) Optionee's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) Optionee's voluntary resignation following the offer to
Optionee of a Lesser Position in replacement of the position held by
Optionee immediately prior to the Corporate Transaction.
Q. LESSER POSITION for Optionee shall mean a new position or a change to
Optionee's position which, compared with Optionee's position with the
Corporation immediately prior to the Corporate Transaction, (i) offers a lower
level of compensation (including base salary, fringe benefits and target bonuses
under any corporate-performance based bonus or incentive programs)
A-2.
<PAGE> 11
or (ii) materially reduces Optionee's duties or level of responsibility.
R. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
Optionee or any other individual in the Service of the Corporation (or any
Parent or Subsidiary).
S. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
T. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
U. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.
V. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option.
W. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
X. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
Y. PERMANENT DISABILITY shall mean the inability of Optionee to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.
Z. PLAN shall mean the Corporation's Restated 1995 Stock Incentive Plan.
AA. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its capacity as administrator of the Plan.
AB. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or an independent consultant.
A-3.
<PAGE> 12
AC. STOCK EXCHANGE shall mean the American Stock Exchange or the New
York Stock Exchange.
AD. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
A-4.
<PAGE> 1
EXHIBIT 99.4
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are
hereby made a part of, that certain Stock Option Agreement dated _______ (the
"Option Agreement") by and between ISS Group, Inc. (the "Corporation") and
_______ ("Optionee") evidencing the stock option granted on such date to
Optionee under the terms of the Corporation's Restated 1995 Stock Incentive
Plan, and such provisions shall be effective immediately. All capitalized terms
in this Addendum, to the extent not otherwise defined herein, shall have the
meanings assigned to them in the Option Agreement.
LIMITED STOCK APPRECIATION RIGHT
1. Optionee is hereby granted a limited stock appreciation right
in tandem with the option, exercisable upon the terms set forth below:
(i) Optionee shall have the unconditional right, exercisable
at any time during the thirty (30)-day period following a Hostile
Take-Over, to surrender the option to the Corporation, to the extent the
option is at the time exercisable for one or more shares of Common
Stock. In return for the surrendered option, Optionee shall receive a
cash distribution from the Corporation in an amount equal to the excess
of (A) the Take-Over Price of the shares of Common Stock for which the
surrendered option (or surrendered portion) is at the time exercisable
over (B) the aggregate Exercise Price payable for such shares.
(ii) To exercise this limited stock appreciation right,
Optionee must, during the applicable thirty (30)-day exercise period,
provide the Corporation with written notice of the option surrender in
which there is specified the number of Option Shares as to which the
option is being surrendered. Such notice must be accompanied by the
return of Optionee's copy of the Option Agreement, together with any
written amendments to such Agreement. The cash distribution shall be
paid to Optionee within five (5) days following such delivery date. The
exercise of the limited stock appreciation right in accordance with
terms of this Addendum is hereby approved by the Plan Administrator in
advance of such exercise, and no further approval of the Plan
Administrator shall be required at the time of the actual option
surrender and cash distribution. Upon receipt of such cash distribution,
the option shall be cancelled with respect to the Option Shares for
which the option has been surrendered, and Optionee shall cease to have
any further right to acquire those Option Shares under the Option
Agreement. The option shall, however, remain outstanding and exercisable
for the balance of the Option Shares (if any) in accordance with the
terms of the Option Agreement, and the Corporation shall issue a new
stock option agreement (substantially in the
<PAGE> 2
same form of the surrendered Option Agreement) for those remaining
Option Shares.
(iii) In no event may this limited stock appreciation right be
exercised when there is not a positive spread between the Fair Market
Value of the Option Shares subject to the surrendered option and the
aggregate Exercise Price payable for such shares. This limited stock
appreciation right shall in all events terminate upon the expiration or
sooner termination of the option and may not be assigned or transferred
by Optionee, except to the extent the option is transferable in
accordance with the provisions of the Option Agreement.
2. For purposes of this Addendum, the following definitions shall
be in effect:
(i) A HOSTILE TAKE-OVER shall be deemed to occur in the
event any person or related group of persons (other than the Corporation
or a person that directly or indirectly controls, is controlled by, or
is under common control with, the Corporation) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) of securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's stockholders which the Board
does not recommend such stockholders to accept.
(ii) The TAKE-OVER PRICE per share shall be deemed to be
equal to the greater of (A) the Fair Market Value per Option Share on
the option surrender date or (B) the highest reported price per share of
Common Stock paid by the tender offeror in effecting the Hostile
Take-Over. However, if the surrendered option is designated as an
Incentive Option in the Grant Notice, then the Take-Over Price shall not
exceed the clause (A) price per share.
2.
<PAGE> 3
IN WITNESS WHEREOF, ISS Group, Inc. has caused this Addendum to be
executed by its duly-authorized officer, and Optionee has executed this
Addendum, all as of the Effective Date specified below.
ISS GROUP, INC.
By:
-------------------------------------------
Title:
----------------------------------------
----------------------------------------------
OPTIONEE
EFFECTIVE DATE: , 199
--------------------
3.
<PAGE> 1
EXHIBIT 99.5
ISS GROUP
STOCK ISSUANCE AGREEMENT
AGREEMENT made as of this _____ day of ______________ 199___, by
and between ISS Group, Inc., a Delaware corporation, and _____________________
Participant in the Corporation's Restated 1995 Stock Incentive Plan.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.
A. PURCHASE OF SHARES
1. PURCHASE. Participant hereby purchases _________________
shares of Common Stock (the "Purchased Shares") pursuant to the provisions of
the Stock Issuance Program at the purchase price of $_______________ per share
(the "Purchase Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to
the Corporation, Participant shall pay the Purchase Price for the Purchased
Shares in cash or cash equivalent and shall deliver a duly-executed blank
Assignment Separate from Certificate (in the form attached hereto as Exhibit I)
with respect to the Purchased Shares.
3. STOCKHOLDER RIGHTS. Until such time as the Corporation
exercises the Repurchase Right, Participant (or any successor in interest) shall
have all stockholder rights (including voting, dividend and liquidation rights)
with respect to the Purchased Shares, subject, however, to the transfer
restrictions of Article B.
B. TRANSFER RESTRICTIONS
1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer,
Participant shall not transfer, assign, encumber or otherwise dispose of any of
the Purchased Shares which are subject to the Repurchase Right.
2. TRANSFEREE OBLIGATIONS. Each person (other than the
Corporation) to whom the Purchased Shares are transferred by means of a
Permitted Transfer must, as a condition precedent to the validity of such
transfer, acknowledge in writing to the Corporation that such person is bound by
the provisions of this Agreement and that the transferred shares are subject to
the Repurchase Right to the same extent such shares would be so subject if
retained by Participant.
3. RESTRICTIVE LEGENDS. The stock certificates for the Purchased
Shares shall be endorsed with the following restrictive legend:
<PAGE> 2
"The shares represented by this certificate are subject to
certain repurchase rights and rights of first refusal granted to the Corporation
and accordingly may not be sold, assigned, transferred, encumbered, or in any
manner disposed of except in conformity with the terms of a written agreement
dated , 199 between the Corporation and the registered holder of the shares (or
the predecessor in interest to the shares). A copy of such agreement is
maintained at the Corporation's principal corporate offices."
C. REPURCHASE RIGHT
1. GRANT. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the sixty (60)-day period
following the date Participant ceases for any reason to remain in Service, to
repurchase at the Purchase Price any or all of the Purchased Shares in which
Participant is not, at the time of his or her cessation of Service, vested in
accordance with the provisions of this Article C Vesting Schedule (such shares
to be hereinafter referred to as the "Unvested Shares").
2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall
be exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the sixty (60)-day exercise period. The notice shall
indicate the number of Unvested Shares to be repurchased and the date on which
the repurchase is to be effected, such date to be not more than thirty (30) days
after the date of such notice. The certificates representing the Unvested Shares
to be repurchased shall be delivered to the Corporation on or before the close
of business on the date specified for the repurchase. Concurrently with the
receipt of such stock certificates, the Corporation shall pay to Owner, in cash
or cash equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the Purchase Price previously paid for the
Unvested Shares which are to be repurchased from Owner.
3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right
shall terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph C.2. In addition, the Repurchase Right shall terminate
and cease to be exercisable with respect to any and all Purchased Shares in
which Participant vests in accordance with the following Vesting Schedule:
Participant shall vest in twenty-five percent (25%) of the
Purchased Shares, and the Repurchase Right shall concurrently lapse with
respect to those Purchased Shares, in a series of four (4) successive
equal annual installments upon Participant's completion of each year of
Service over the four (4)-year period measured from , 199 .
4. RECAPITALIZATION. Any new, substituted or additional
securities or other property (including cash paid other than as a regular cash
dividend) which is by reason of any Recapitalization distributed with respect to
the Purchased Shares shall be immediately subject to the Repurchase Right and
any escrow requirements hereunder, but only to the extent the Purchased Shares
are at the time covered by such right or escrow requirements. Appropriate
2.
<PAGE> 3
adjustments to reflect such distribution shall be made to the number and/or
class of Purchased Shares subject to this Agreement and to the price per share
to be paid upon the exercise of the Repurchase Right in order to reflect the
effect of any such Recapitalization upon the Corporation's capital structure;
provided, however, that the aggregate purchase price shall remain the same.
5. CORPORATE TRANSACTION.
(a) The Repurchase Right shall automatically terminate in
its entirety, and all the Purchased Shares shall vest in full, immediately prior
to the consummation of any Corporate Transaction, except to the extent the
Repurchase Right is to be assigned to the successor entity in such Corporate
Transaction.
(b) To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to any new securities
or other property (including any cash payments) received in exchange for the
Purchased Shares in consummation of the Corporate Transaction, but only to the
extent the Purchased Shares are at the time covered by such right. Appropriate
adjustments shall be made to the price per share payable upon exercise of the
Repurchase Right to reflect the effect of the Corporate Transaction upon the
Corporation's capital structure; provided, however, that the aggregate purchase
price shall remain the same. The new securities or other property (including any
cash payments) issued or distributed with respect to the Purchased Shares in
consummation of the Corporate Transaction shall be immediately deposited in
escrow with the Corporation (or the successor entity) and shall not be released
from escrow until Participant vests in such securities or other property in
accordance with the same Vesting Schedule in effect for the Purchased Shares.
(c) If the Repurchase Right is assigned to the successor
entity in the Corporate Transaction, and at the time of, or within twelve (12)
months following, such Corporate Transaction, either (i) Participant is offered
a Lesser Position in replacement of the position held by him or her immediately
prior to the Corporate Transaction or (ii) Participant's Service terminates by
reason of an Involuntary Termination, then, effective as of the date on which
such Lesser Position is offered to Participant or the effective date of such
Involuntary Termination, respectively, the Repurchase Right shall automatically
lapse with respect to, and Participant shall vest in, the next annual
installment of Purchased Shares scheduled to vest in accordance with the Vesting
Schedule. Following such acceleration, to the extent Participant continues in
Service, the Vesting Schedule shall be adjusted so that the Repurchase Right
shall lapse with respect to, and Participant shall vest in, each subsequent
annual installment of Purchased Shares on each subsequent anniversary of the
effective date of such accelerated vesting.
D. SPECIAL TAX ELECTION
1. SECTION 83(B) ELECTION . Under Code Section 83, the excess of
the fair market value of the Purchased Shares on the date any forfeiture
restrictions applicable to such shares lapse over the Purchase Price paid for
such shares will be reportable as ordinary income
3.
<PAGE> 4
on the lapse date. For this purpose, the term "forfeiture restrictions" includes
the right of the Corporation to repurchase the Purchased Shares pursuant to the
Repurchase Right. Participant may elect under Code Section 83(b) to be taxed at
the time the Purchased Shares are acquired, rather than when and as such
Purchased Shares cease to be subject to such forfeiture restrictions. Such
election must be filed with the Internal Revenue Service within thirty (30) days
after the date of this Agreement. Even if the fair market value of the Purchased
Shares on the date of this Agreement equals the Purchase Price paid (and thus no
tax is payable), the election must be made to avoid adverse tax consequences in
the future. THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT II HERETO.
PARTICIPANT UNDERSTANDS THAT FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE
THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME AS THE
FORFEITURE RESTRICTIONS LAPSE.
2. FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT IS
PARTICIPANT'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY
ELECTION UNDER CODE SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE CORPORATION
OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
E. GENERAL PROVISIONS
1. ASSIGNMENT. The Corporation may assign the Repurchase Right to
any person or entity selected by the Board, including (without limitation) one
or more stockholders of the Corporation.
2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement
or in the Plan shall confer upon Participant any right to continue in Service
for any period of specific duration or interfere with or otherwise restrict in
any way the rights of the Corporation (or any Parent or Subsidiary employing or
retaining Participant) or of Participant, which rights are hereby expressly
reserved by each, to terminate Participant's Service at any time for any reason,
with or without cause.
3. NOTICES. Any notice required to be given under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
4. NO WAIVER. The failure of the Corporation in any instance to
exercise the Repurchase Right shall not constitute a waiver of any other
repurchase rights that may subsequently arise under the provisions of this
Agreement or any other agreement between the Corporation and Participant. No
waiver of any breach or condition of this Agreement shall be deemed to be a
waiver of any other or subsequent breach or condition, whether of like or
4.
<PAGE> 5
different nature.
5. CANCELLATION OF SHARES. If the Corporation shall make
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Purchased Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such time,
the person from whom such shares are to be repurchased shall no longer have any
rights as a holder of such shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such shares shall be
deemed purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
F. MISCELLANEOUS PROVISIONS
1. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Georgia without resort to
that State's conflict-of-laws rules.
2. PARTICIPANT UNDERTAKING. Participant hereby agrees to take
whatever additional action and execute whatever additional documents the
Corporation may deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either Participant or the
Purchased Shares pursuant to the provisions of this Agreement.
3. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the terms of the Plan.
4. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon Participant, Participant's assigns and the legal
representatives, heirs and legatees of Participant's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
5.
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Agreement on
the day and year first indicated above.
ISS GROUP, INC.
By:
--------------------------------------------
Title:
-----------------------------------------
Address:
---------------------------------------
---------------------------------------
---------------------------------------
-----------------------------------------------
PARTICIPANT
Address:
---------------------------------------
---------------------------------------
6.
<PAGE> 7
SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of Participant has read and hereby
approves the foregoing Stock Issuance Agreement. In consideration of the
Corporation's granting Participant the right to acquire the Purchased Shares in
accordance with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms of such Agreement, including (without
limitation) the right of the Corporation (or its assigns) to purchase any
Purchased Shares in which Participant is not vested at the time of his or her
cessation of Service.
PARTICIPANT'S SPOUSE
Address:
----------------------------------
-------------------------------------------
7.
<PAGE> 8
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ______________________ hereby sell(s),
assign(s) and transfer(s) unto ISS Group, Inc. (the "Corporation"),
______________________(____) shares of the Common Stock of the Corporation
standing in his or her name on the books of the Corporation represented by
Certificate No.___________ herewith and do(es) hereby irrevocably constitute and
appoint __________ Attorney to transfer the said stock on the books of the
Corporation with full power of substitution in the premises. Dated: ---------
Signature
-------------------------------
INSTRUCTION: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Participant.
<PAGE> 9
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Issuance Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. CORPORATION shall mean ISS Group, Inc., a Delaware corporation.
G. INVOLUNTARY TERMINATION shall mean the termination of Participant's
Service which occurs by reason of:
(i) Participant's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) Participant's voluntary resignation following the offer to
Participant of a Lesser Position in replacement of the position held by
Participant immediately prior to the Corporate Transaction.
H. LESSER POSITION for Participant shall mean a new position or a change
to Participant's position which, compared with Participant's position with the
Corporation immediately prior to the Corporate Transaction, (i) offers a lower
level of compensation (including base salary, fringe benefits and target bonuses
under any corporate-performance based bonus or incentive programs) or (ii)
materially reduces Participant's duties or level of responsibility.
A-1.
<PAGE> 10
I. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Participant, any unauthorized use or disclosure by
Participant of confidential information or trade secrets of the Corporation (or
any Parent or Subsidiary), or any other intentional misconduct by Participant
adversely affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
Participant or any other individual in the Service of the Corporation (or any
Parent or Subsidiary).
J. OWNER shall mean Participant and all subsequent holders of the
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Participant.
K. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
L. PARTICIPANT shall mean the person to whom shares are issued under the
Stock Issuance Program.
M. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
Purchased Shares, provided and only if Participant obtains the Corporation's
prior written consent to such transfer, (ii) a transfer of title to the
Purchased Shares effected pursuant to Participant's will or the laws of
intestate succession following Participant's death or (iii) a transfer to the
Corporation in pledge as security for any purchase-money indebtedness incurred
by Participant in connection with the acquisition of the Purchased Shares.
N. PLAN shall mean the Corporation's Restated 1995 Stock Incentive Plan.
O. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its capacity as administrator of the Plan.
P. PURCHASE PRICE shall have the meaning assigned to such term in
Paragraph A.1.
Q. PURCHASED SHARES shall have the meaning assigned to such term in
Paragraph A.1.
R. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
A-2.
<PAGE> 11
S. REORGANIZATION shall mean any of the following transactions:
(i) a merger or consolidation in which the Corporation is
not the surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the
surviving entity but in which the Corporation's outstanding
voting securities are transferred in whole or in part to a
person or persons different from the persons holding those
securities immediately prior to the merger, or
(iv) any transaction effected primarily to change the state
in which the Corporation is incorporated or to create a holding
company structure.
T. REPURCHASE RIGHT shall mean the right granted to the Corporation in
accordance with Article D.
U. SEC shall mean the Securities and Exchange Commission.
V. SERVICE shall mean the Participant's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance, a non-employee member
of the board of directors or an independent consultant.
W. STOCK ISSUANCE PROGRAM shall mean the Stock Issuance Program under
the Plan.
X. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
Y. VESTING SCHEDULE shall mean the vesting schedule specified in
Paragraph C.3 pursuant to which Participant is to vest in the Purchased Shares
in a series of installments over the Participant's period of Service.
Z. UNVESTED SHARES shall have the meaning assigned to such term in
Paragraph C.1.
A-3.
<PAGE> 1
EXHIBIT 99.6
INITIAL GRANT
ISS GROUP, INC.
NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
AUTOMATIC STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of ISS Group, Inc. (the
"Corporation"):
Optionee:________________________________________________________
Grant Date:______________________________________________________
Exercise Price: $_________________ per share
Number of Option Shares: 50,000 shares
Expiration Date:_________________________________________________
Type of Option: Non-Statutory Stock Option
Date Exercisable: Immediately Exercisable
Vesting Schedule: The Option Shares shall be unvested and subject
to repurchase by the Corporation at the Exercise Price paid per
share. Optionee shall acquire a vested interest in, and the
Corporation's repurchase right will accordingly lapse with
respect to the Option Shares in a series of four (4) equal
successive annual installments upon Optionee's completion of each
year of service as a member of the Corporation's Board of
Directors (the "Board") over the four (4)-year period measured
from the Grant Date. In no event shall any additional Option
Shares vest after Optionee's cessation of Board service.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the automatic option grant
program under the ISS Group, Inc. Restated 1995 Incentive Plan (the "Plan").
Optionee further agrees to be bound by the terms of the Plan and the terms of
the Option as set forth in the Automatic Stock Option Agreement attached hereto
as Exhibit A. A copy of the Plan is available upon request made to the Corporate
Secretary at the Corporation's principal offices.
<PAGE> 2
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO A REPURCHASE RIGHT
EXERCISABLE BY THE CORPORATION AND ITS ASSIGNS. THE TERMS OF SUCH RIGHT SHALL BE
SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE SATISFACTORY TO
THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION EXERCISE.
No Impairment of Rights. Nothing in this Notice or the attached
Automatic Stock Option Agreement or in the Plan shall interfere with or
otherwise restrict in any way the rights of the Corporation and the
Corporation's stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
Definitions. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Automatic Stock
Option Agreement.
_____________________, 199_
Date
ISS GROUP, INC.
By: ___________________________________________
Title:_________________________________________
_______________________________________________
OPTIONEE
Address:_______________________________________
_______________________________________________
ATTACHMENTS
Exhibit A - Automatic Stock Option Agreement
2.
<PAGE> 3
EXHIBIT A
AUTOMATIC STOCK OPTION AGREEMENT
<PAGE> 1
EXHIBIT 99.7
ANNUAL GRANT
ISS GROUP, INC.
NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
AUTOMATIC STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of ISS Group, Inc. (the
"Corporation"):
Optionee:______________________________________________________
Grant Date:____________________________________________________
Exercise Price: $_____________________per share
Number of Option Shares: 5,000 shares
Expiration Date:_______________________________________________
Type of Option: Non-Statutory Stock Option
Date Exercisable: Immediately Exercisable
Vesting Schedule: The Option Shares shall be unvested and subject
to repurchase by the Corporation at the Exercise Price paid per
share. Optionee shall acquire a vested interest in, and the
Corporation's repurchase right will accordingly lapse with
respect to the Option Shares in a series of two (2) equal
successive annual installments upon Optionee's completion of each
year of service as a member of the Corporation's Board of
Directors (the "Board") over the two (2)-year period measured
from the Grant Date. In no event shall any additional Option
Shares vest after Optionee's cessation of Board service.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the automatic option grant
program under the ISS Group, Inc. Restated 1995 Stock Incentive Plan (the
"Plan"). Optionee further agrees to be bound by the terms of the Plan and the
terms of the Option as set forth in the Automatic Stock Option Agreement
attached hereto as Exhibit A. A copy of the Plan is available upon request made
to the Corporate Secretary at the Corporation's principal offices.
<PAGE> 2
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO A REPURCHASE RIGHT
EXERCISABLE BY THE CORPORATION AND ITS ASSIGNS. THE TERMS OF SUCH RIGHT SHALL BE
SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE SATISFACTORY TO
THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION EXERCISE.
No Impairment of Rights. Nothing in this Notice or the attached
Automatic Stock Option Agreement or in the Plan shall interfere with or
otherwise restrict in any way the rights of the Corporation and the
Corporation's stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
Definitions. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Automatic Stock
Option Agreement.
_____________________ , 199_
Date
ISS GROUP, INC.
By:___________________________________________
Title:________________________________________
______________________________________________
OPTIONEE
Address:______________________________________
______________________________________________
ATTACHMENTS
Exhibit A - Automatic Stock Option Agreement
2.
<PAGE> 3
EXHIBIT A
AUTOMATIC STOCK OPTION AGREEMENT
<PAGE> 1
EXHIBIT 99.8
ISS GROUP, INC.
AUTOMATIC STOCK OPTION AGREEMENT
RECITALS
A. The Corporation has implemented an automatic option grant program
under the Plan pursuant to which eligible non-employee members of the Board will
automatically receive special option grants at periodic intervals over their
period of Board service in order to provide such individuals with a meaningful
incentive to continue to serve as members of the Board.
B. Optionee is an eligible non-employee Board member, and this Agreement
is executed pursuant to, and is intended to carry out the purposes of, the Plan
in connection with the automatic grant of an option to purchase shares of Common
Stock under the Plan.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, a Non-Statutory Option to purchase up to the number of Option
Shares specified in the Grant Notice. The Option Shares shall be purchasable
from time to time during the option term specified in Paragraph 2 at the
Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5, 6 or 7.
3. LIMITED TRANSFERABILITY. This option may, in connection with
the Optionee's estate plan, be assigned in whole or in part during Optionee's
lifetime to one or more members of the Optionee's immediate family or to a trust
established for the exclusive benefit of one or more such family members. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Corporation may deem appropriate. Should
the Optionee die while holding this option, then this option shall be
transferred in accordance with Optionee's will or the laws of descent and
distribution.
<PAGE> 2
4. EXERCISABILITY/VESTING.
(a) This option shall be immediately exercisable for any
or all of the Option Shares, whether or not the Option Shares are vested in
accordance with the Vesting Schedule and shall remain so exercisable until the
Expiration Date or sooner termination of the option term under Paragraph 5, 6 or
7.
(b) Optionee shall, in accordance with the Vesting
Schedule, vest in the Option Shares in one or more installments over his or her
period of Board service. Vesting in the Option Shares may be accelerated
pursuant to the provisions of Paragraph 5, 6 or 7. In no event, however, shall
any additional Option Shares vest following Optionee's cessation of service as a
Board member.
5. CESSATION OF BOARD SERVICE. Should Optionee's service as a
Board member cease while this option remains outstanding, then the option term
specified in Paragraph 2 shall terminate (and this option shall cease to be
outstanding) prior to the Expiration Date in accordance with the following
provisions:
(a) Should Optionee cease to serve as a Board member for
any reason (other than death or Permanent Disability) while holding this option,
then the period for exercising this option shall be reduced to a twelve
(12)-month period (commencing with the date of such cessation of Board service),
but in no event shall this option be exercisable at any time after the
Expiration Date. During such limited period of exercisability, this option may
not be exercised in the aggregate for more than the number of Option Shares (if
any) in which Optionee is vested on the date Optionee ceases service as a Board
member. Upon the earlier of (i) the expiration of such twelve (12)-month period
or (ii) the specified Expiration Date, the option shall terminate and cease to
be exercisable with respect to any vested Option Shares for which the option has
not been exercised.
(b) Should Optionee die during the twelve (12)-month
period following his or her cessation of Board service, then the personal
representative of Optionee's estate or the person or persons to whom the option
is transferred pursuant to Optionee's will or in accordance with the laws of
descent and distribution shall have the right to exercise this option for any or
all of the Option Shares in which Optionee is vested at the time of Optionee's
cessation of Board service (less any Option Shares purchased by Optionee after
such cessation of Board service but prior to death). Such right of exercise
shall terminate, and this option shall accordingly cease to be exercisable for
such vested Option Shares, upon the earlier of (i) the expiration of the twelve
(12)-month period measured from the date of Optionee's cessation of Board
service or (ii) the specified Expiration Date.
(c) Should Optionee cease service as a Board member by
reason of death or Permanent Disability, then all Option Shares at the time
subject to this option but not otherwise vested shall vest in full so that
Optionee (or the personal representative of Optionee's estate or the person or
persons to whom the option is transferred upon Optionee's death) shall
2.
<PAGE> 3
have the right to exercise this option for any or all of the Option Shares as
fully-vested shares of Common Stock at any time prior to the earlier of (i) the
expiration of the twelve (12)-month period measured from the date of Optionee's
cessation of Board service or (ii) the specified Expiration Date.
(d) Upon Optionee's cessation of Board service for any
reason other than death or Permanent Disability, this option shall immediately
terminate and cease to be outstanding with respect to any and all Option Shares
in which Optionee is not otherwise at that time vested in accordance with the
normal Vesting Schedule or the special vesting acceleration provisions of
Paragraph 6 or 7 below.
(e) In the event of a Corporate Transaction or Change in
Control, the provisions of Paragraph 6 or 7 shall govern the period for which
this option is to remain exercisable following Optionee's cessation of Board
service and shall supersede any provisions to the contrary in this paragraph.
6. CORPORATE TRANSACTION.
(a) In the event of a Corporate Transaction, all Option
Shares at the time subject to this option but not otherwise vested shall
automatically vest so that this option shall, immediately prior to the effective
date of such Corporate Transaction, become exercisable for any or all of the
Option Shares as fully-vested shares of Common Stock. Immediately following the
Corporate Transaction, this option shall terminate and cease to be exercisable
except to the extent assumed by the successor corporation (or parent thereof) in
connection with such Corporate Transaction.
(b) If this option is assumed in connection with a
Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and class
of securities which would have been issuable to Optionee in consummation of such
Corporate Transaction had the option been exercised immediately prior to such
Corporate Transaction, and appropriate adjustments shall also be made to the
Exercise Price, provided the aggregate Exercise Price shall remain the same.
(c) This Agreement shall not in any way affect the right
of the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
7. CHANGE IN CONTROL/HOSTILE TAKE-OVER.
(a) All Option Shares subject to this option at the time
of a Change in Control but not otherwise vested shall automatically vest so that
this option shall, immediately prior to the effective date of such Change in
Control, become fully exercisable for all of the Option Shares at the time
subject to this option and may be exercised for all or any portion of
3.
<PAGE> 4
such shares as fully-vested shares of Common Stock. This option shall remain
exercisable for such fully-vested Option Shares until the earliest to occur of
(i) the Expiration Date, (ii) the sooner termination of this option in
accordance with Paragraph 5 or 6 or (iii) the surrender of the option in
connection with a Hostile Take-Over.
(b) Optionee shall have the unconditional right
(exercisable during the thirty (30)-day period immediately following the
consummation of a Hostile Take-Over) to surrender this option to the Corporation
in exchange for a cash distribution from the Corporation in an amount equal to
the excess of (i) the Take-Over Price of the Option Shares at the time subject
to the surrendered option (whether or not those Option Shares are otherwise at
the time vested) over (ii) the aggregate Exercise Price payable for such shares.
This Paragraph 7(b) limited stock appreciation right shall in all events
terminate upon the expiration or sooner termination of the option term and may
not be assigned or transferred by Optionee.
(c) To exercise the Paragraph 7(b) limited stock
appreciation right, Optionee must, during the applicable thirty (30)-day
exercise period, provide the Corporation with written notice of the option
surrender in which there is specified the number of Option Shares as to which
the Option is being surrendered. Such notice must be accompanied by the return
of Optionee's copy of this Agreement, together with any written amendments to
such Agreement. The cash distribution shall be paid to Optionee within five (5)
days following such delivery date, and no approval or consent of the Board shall
be required in connection with such option surrender and cash distribution. Upon
receipt of such cash distribution, this option shall be cancelled with respect
to the Option Shares subject to the surrendered option (or the surrendered
portion) and Optionee shall cease to have any further right to acquire those
Option Shares under this Agreement. The option shall, however, remain
outstanding for the balance of the Option Shares (if any) in accordance with the
terms of this Agreement, and the Corporation shall issue a new stock option
agreement (substantially in the same form as this Agreement) for those remaining
Option Shares.
8. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
9. STOCKHOLDER RIGHTS. The holder of this option shall not have
any stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
4.
<PAGE> 5
10. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all
or any part of the Option Shares for which this option is at the time
exercisable, Optionee (or any other person or persons exercising the option)
must take the following actions:
(i) To the extent the option is exercised for vested
Option Shares, execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised. To the
extent this option is exercised for unvested Option Shares, execute and
deliver to the Corporation a Purchase Agreement.
(ii) Pay the aggregate Exercise Price for the
purchased shares in one or more of the following forms:
(A) cash or check made payable to the
Corporation,
(B) shares of Common Stock held by Optionee
(or any other person or persons exercising the option) for the
requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date, or
(C) to the extent the option is exercised for
vested Option Shares, through a special sale and remittance
procedure pursuant to which Optionee (or any other person or
persons exercising the option) shall concurrently provide
irrevocable written instructions (I) to a Corporation-designated
brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the
aggregate Exercise Price payable for the purchased shares plus
all applicable Federal, state and local income and employment
taxes required to be withheld by the Corporation by reason of
such exercise and (II) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage
firm in order to complete the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise (or the
Purchase Agreement) delivered to the Corporation in connection
with the option exercise.
5.
<PAGE> 6
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option
(if other than Optionee) have the right to exercise this option.
(b) As soon after the Exercise Date as practical, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto. To the extent any such Option
Shares are unvested, the certificates for those Option Shares shall be endorsed
with an appropriate legend evidencing the Corporation's repurchase rights and
may be held in escrow with the Corporation until such shares vest.
(c) In no event may this option be exercised for any
fractional shares.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the Nasdaq
National Market, if applicable) on which the Common Stock may be listed for
trading at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain approval
from any regulatory body having authority deemed by the Corporation to be
necessary to the lawful issuance and sale of any Common Stock pursuant to this
option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained. The Corporation, however, shall use its best efforts to
obtain all such approvals.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise
provided in Paragraph 3 or 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns and the legal representatives, heirs
and legatees of Optionee's estate.
13. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
14. CONSTRUCTION. This Agreement and the option evidenced hereby
are made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan.
6.
<PAGE> 7
15. GOVERNING LAW. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
Georgia without resort to that State's conflict-of-laws rules.
7.
<PAGE> 8
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify ISS Group, Inc. (the "Corporation") that I elect
to purchase ______ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $ ______ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me under the
Corporation's Restated 1995 Stock Incentive Plan on ______ , 199_.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price for any Purchased Shares in which I am vested at the time of exercise of
the Option.
____________________________, 199_
Date
-------------------------------------------
Optionee
Address:
-------------------------------------------
Print name in exact manner
it is to appear on the
stock certificate:
-------------------------------------------
Address to which certificate
is to be sent, if different
from address above:
-------------------------------------------
-------------------------------------------
Social Security Number:
-------------------------------------------
<PAGE> 9
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Automatic Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's stockholders which the Board
does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of such period or
(B) have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (A) who were still in office at the time the Board approved such
election or nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution
of the Corporation.
A-1.
<PAGE> 10
G. CORPORATION shall mean ISS Group, Inc., a Delaware corporation.
H. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 10 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price per share as specified
in the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as the price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
which serves as the primary market for the Common Stock, as such price
is officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
L. GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.
M. GRANT NOTICE shall mean the Notice of Grant of Automatic Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
N. HOSTILE TAKE-OVER shall mean the acquisition, directly or indirectly,
by any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
A-2.
<PAGE> 11
O. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
P. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
Q. NOTICE OF EXERCISE shall mean the notice of exercise in the form of
Exhibit I.
R. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option.
S. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
T. PERMANENT DISABILITY shall mean the inability of Optionee to perform
his or her usual duties as a member of the Board by reason of any medically
determinable physical or mental impairment which is expected to result in death
or has lasted or can be expected to last for a continuous period of twelve (12)
months or more.
U. PLAN shall mean the Corporation's Restated 1995 Stock Incentive Plan.
V. PURCHASE AGREEMENT shall mean the stock purchase agreement (in form
and substance satisfactory to the Corporation) which grants the Corporation the
right to repurchase, at the Exercise Price, any and all unvested Option Shares
held by Optionee at the time of Optionee's cessation of Board service and which
precludes the sale, transfer or other disposition of any purchased Option Shares
while subject to such repurchase right.
W. STOCK EXCHANGE shall mean the American Stock Exchange or the New York
Stock Exchange.
X. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting the
Hostile Take-Over.
Y. VESTING SCHEDULE shall mean the vesting schedule specified in the
Grant Notice.
A-3.
<PAGE> 1
EXHIBIT 99.9
COMPENSATION AGREEMENT
Agreement made as of the _______ day of ___________, 1998 by and
between ISS Group, Inc., a Delaware corporation (the "Corporation"), and 1~
("Optionee").
W I T N E S S E T H
WHEREAS, in consideration for services performed by Optionee, the
Corporation granted Optionee a stock option on , 199 to purchase 20,000 shares
of the Corporation's Common Stock (the "Option") upon the terms and conditions
set forth in the documentation evidencing such Option.
NOW, THEREFORE, in consideration of the above premises, the
parties hereto agree as follows:
1. The Corporation and Optionee acknowledge and agree that the
Option is granted solely as compensation for services rendered the Corporation
by Optionee and not for any capital-raising purposes or in connection with any
capital-raising activities.
2. The Option shall not be transferable or assignable except in
connection with Optionee's death.
3. This agreement is intended to constitute a written
compensation contract within the meaning of (i) Rule 701 of the Securities Act
of 1933, as amended and (ii) Rule 405 of Regulation C of the Rules promulgated
under the Securities Act of 1933, as amended.
4. This agreement is intended solely to memorialize the agreement
and understanding which exists between Optionee and the Corporation concerning
the grant of the Option. Nothing herein or in the documentation evidencing the
Option is intended to provide Optionee with the right to remain in the
Corporation's service for any specific period, and Optionee's services may be
terminated at any time by the Corporation, for any reason, with or without
cause.
IN WITNESS WHEREOF, the parties hereto have executed this
agreement as of the date first above written.
ISS GROUP, INC.
By:
- ------------------------------- -------------------------------
1~, Optionee Authorized Officer
<PAGE> 1
EXHIBIT 99.10
ISS GROUP, INC.
NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of ISS Group, Inc. (the
"Corporation"):
Optionee:_______________________________________________________
Grant Date:_____________________________________________________
Exercise Price: $____________________________per share
Number of Option Shares: 20,000 shares
Expiration Date:________________________________________________
Type of Option: Non-Statutory Stock Option
Date Exercisable: Immediately Exercisable
Vesting Schedule: The Option Shares shall initially be unvested
and subject to repurchase by the Corporation at the Exercise
Price paid per share. Optionee shall acquire a vested interest
in, and the Corporation's repurchase right shall accordingly
lapse with respect to, the Option Shares in a series of four (4)
successive equal annual installments upon Optionee's completion
of each year of Board service over the four (4)-year period
measured from the Grant Date. In no event shall any additional
Option Shares vest after Optionee's cessation of Board service.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the Stock Option Agreement
attached hereto as Exhibit A.
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED OPTION
SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL NOT BE TRANSFERABLE AND
SHALL BE SUBJECT TO REPURCHASE BY THE CORPORATION, AT THE EXERCISE PRICE PAID
PER SHARE, UPON OPTIONEE'S TERMINATION OF SERVICE AS A MEMBER OF THE
CORPORATION'S BOARD OF DIRECTORS PRIOR TO VESTING IN THOSE SHARES.
<PAGE> 2
THE TERMS AND CONDITIONS OF SUCH REPURCHASE RIGHT SHALL BE SPECIFIED IN A STOCK
PURCHASE AGREEMENT, IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION,
EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION EXERCISE.
No Impairment of Rights. Nothing in this Notice or in the
attached Stock Option Agreement shall interfere with or otherwise restrict in
any way the rights of the Corporation or the Corporation's stockholders to
remove Optionee from the Board at any time in accordance with the provisions of
applicable law.
Definitions. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
____________________________ , 199_
Date
ISS GROUP, INC.
By:__________________________________________
Title:_______________________________________
_____________________________________________
OPTIONEE
Address:_____________________________________
_____________________________________________
ATTACHMENTS
EXHIBIT A - STOCK OPTION AGREEMENT
2.
<PAGE> 3
EXHIBIT A
STOCK OPTION AGREEMENT
<PAGE> 1
EXHIBIT 99.11
ISS GROUP, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Corporation wishes to make a stock option grant to Optionee in
order to provide such person with an equity incentive to continue in the
Corporation's service.
B. Optionee is to render valuable services to the Corporation as a
non-employee Board member (or a Parent or Subsidiary), and this Agreement is
executed in connection with the option grant made to such individual to purchase
shares of Common Stock.
C. The granted option is issued to Optionee in compensation for the
services which Optionee is to render the Corporation and not for any
capital-raising purposes or in connection with any capital-raising activities.
D. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, a Non-Statutory Option to purchase up to the number of Option
Shares specified in the Grant Notice. The Option Shares shall be purchasable
from time to time during the option term specified in Paragraph 2 at the
Exercise Price.
2. OPTION TERM. This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5, 6 or 7.
3. LIMITED TRANSFERABILITY. This option may, in connection with
the Optionee's estate plan, be assigned in whole or in part during Optionee's
lifetime to one or more members of the Optionee's immediate family or to a trust
established for the exclusive benefit of one or more such family members. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Corporation may deem appropriate. Should
the Optionee die while holding this option, then this option shall be
transferred in accordance with Optionee's will or the laws of descent and
distribution.
<PAGE> 2
4. EXERCISABILITY/VESTING.
(a) This option shall be immediately exercisable for any
or all of the Option Shares, whether or not the Option Shares are vested in
accordance with the Vesting Schedule set forth on the Grant Notice, and shall
remain so exercisable until the Expiration Date or the sooner termination of the
option term under Paragraph 5, 6 or 7.
(b) Optionee shall, in accordance with the Vesting
Schedule set forth in the Grant Notice, vest in the Option Shares in a series of
installments over his or her period of Board service. Vesting in the Option
Shares may be accelerated pursuant to the provisions of Paragraph 5, 6 or 7. In
no event, however, shall any additional Option Shares vest following Optionee's
cessation of service as a Board member.
5. CESSATION OF BOARD SERVICE. Should Optionee's service as a
Board member cease while this option remains outstanding, then the option term
specified in Paragraph 2 shall terminate (and this option shall cease to be
outstanding) prior to the Expiration Date in accordance with the following
provisions:
(i) Should Optionee cease to serve as a Board member
for any reason (other than death or Permanent Disability) while holding
this option, then the period for exercising this option shall be reduced
to a twelve (12)-month period commencing with the date of such cessation
of Board service, but in no event shall this option be exercisable at
any time after the Expiration Date. During such limited period of
exercisability, this option may not be exercised in the aggregate for
more than the number of Option Shares (if any) in which Optionee is
vested on the date Optionee ceases service as a Board member. Upon the
earlier of (i) the expiration of such twelve (12)- month period or (ii)
the specified Expiration Date, the option shall terminate and cease to
be exercisable with respect to any vested Option Shares for which the
option has not been exercised.
(ii) Should Optionee die during the twelve (12)-month
period following his or her cessation of Board service, then the
personal representative of Optionee's estate or the person or persons to
whom the option is transferred pursuant to Optionee's will or in
accordance with the laws of descent and distribution shall have the
right to exercise this option for any or all of the Option Shares in
which Optionee is vested at the time of Optionee's cessation of Board
service (less any Option Shares purchased by Optionee after such
cessation of Board service but prior to death). Such right of exercise
shall terminate, and this option shall accordingly cease to be
exercisable for such vested Option Shares, upon the earlier of (i) the
expiration of the twelve (12)- month period measured from the date of
Optionee's cessation of Board service or (ii) the specified Expiration
Date of the option term.
2.
<PAGE> 3
(iii) Should Optionee cease service as a Board member
by reason of death or Permanent Disability, then all Option Shares at
the time subject to this option but not otherwise vested shall
immediately vest in full so that Optionee (or the personal
representative of Optionee's estate or the person or persons to whom the
option is transferred upon Optionee's death) shall have the right to
exercise this option for any or all of the Option Shares as fully-vested
shares of Common Stock at any time prior to the earlier of (i) the
expiration of the twelve (12)-month period measured from the date of
Optionee's cessation of Board service or (ii) the specified Expiration
Date.
(iv) Upon Optionee's cessation of Board service for
any reason other than death or Permanent Disability, this option shall
immediately terminate and cease to be outstanding with respect to any
and all Option Shares in which Optionee is not otherwise at that time
vested in accordance with the normal Vesting Schedule set forth in the
Grant Notice or the special vesting acceleration provisions of Paragraph
6 or 7 below.
6. CORPORATE TRANSACTION.
(a) In the event of a Corporate Transaction, all Option
Shares at the time subject to this option but not otherwise vested shall
automatically vest so that this option shall, immediately prior to the specified
effective date for the Corporate Transaction, become fully exercisable for all
of the Option Shares at the time subject to this option and may be exercised for
all or any portion of such shares as fully-vested shares of Common Stock.
Immediately following the consummation of the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation or its parent company.
(b) If this option is assumed in connection with a
Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and class
of securities which would have been issuable to Optionee in consummation of such
Corporate Transaction had the option been exercised immediately prior to such
Corporate Transaction, and appropriate adjustments shall also be made to the
Exercise Price, provided the aggregate Exercise Price shall remain the same.
7. CHANGE IN CONTROL/HOSTILE TAKE-OVER.
(a) All Option Shares subject to this option at the time
of a Change in Control but not otherwise vested shall automatically vest so that
this option shall, immediately prior to the effective date of such Change in
Control, become fully exercisable for all of the Option Shares at the time
subject to this option and may be exercised for all or any portion of such
shares as fully-vested shares of Common Stock. This option shall remain
exercisable for such fully-vested Option Shares until the earliest to occur of
(i) the specified Expiration Date,
3.
<PAGE> 4
(ii) the sooner termination of this option in accordance with Paragraph 5 or 6
or (iii) the surrender of this option under Paragraph 7(b).
(b) Optionee shall have an unconditional right
(exercisable during the thirty (30)-day period immediately following the
consummation of a Hostile Take-Over) to surrender this option to the Corporation
in exchange for a cash distribution from the Corporation in an amount equal to
the excess of (i) the Take-Over Price of the Option Shares at the time subject
to the surrendered option (whether or not those Option Shares are otherwise at
the time vested) over (ii) the aggregate Exercise Price payable for such shares.
This Paragraph 7(b) limited stock appreciation right shall in all events
terminate upon the expiration or sooner termination of the option term and may
not be assigned or transferred by Optionee.
(c) To exercise the Paragraph 7(b) limited stock
appreciation right, Optionee must, during the applicable thirty (30)-day
exercise period, provide the Corporation with written notice of the option
surrender in which there is specified the number of Option Shares as to which
the option is being surrendered. Such notice must be accompanied by the return
of Optionee's copy of this Agreement, together with any written amendments to
such Agreement. The cash distribution shall be paid to Optionee within five (5)
business days following such delivery date, and the consent of the Board shall
not be required in connection with such option surrender and cash distribution.
Upon receipt of such cash distribution, this option shall be cancelled with
respect to the shares subject to the surrendered option (or the surrendered
portion), and Optionee shall cease to have any further right to acquire those
Option Shares under this Agreement. The option shall, however, remain
outstanding for the balance of the Option Shares (if any) in accordance with the
terms and provisions of this Agreement, and the Corporation shall accordingly
issue a new stock option agreement (substantially in the same form as this
Agreement) for those remaining Option Shares.
8. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the number and/or
class of securities subject to this option and (ii) the Exercise Price in order
to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder; provided, however, that the aggregate Exercise Price shall
remain the same.
9. STOCKHOLDER RIGHTS. The holder of this option shall not have
any stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
4.
<PAGE> 5
10. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option for all or any part
of the Option Shares for which the option is at the time exercisable, Optionee
or, in the case of exercise after Optionee's death, Optionee's executor,
administrator, heir or legatee, as the case may be, must take the following
actions:
(i) To the extent the option is exercised for
vested Option Shares, the Secretary of the Corporation shall be provided
with written notice of the option exercise (the "Exercise Notice") in
substantially the form of Exhibit I attached hereto, in which there is
specified the number of vested Option Shares to be purchased under the
exercised option. To the extent that the option is exercised for one or
more unvested Option Shares, Optionee (or other person exercising the
option) shall deliver to the Secretary of the Corporation a Purchase
Agreement for those unvested Option Shares.
(ii) The Exercise Price for the purchased
shares shall be paid in one or more of the following alternative forms:
- cash or check made payable to the
Corporation's order; or
- shares of Common Stock held by Optionee
(or any other person or persons exercising the option) for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date; or
- to the extent the option is exercised for
vested Option Shares, through a special sale and remittance
procedure pursuant to which Optionee shall provide irrevocable
written instructions (A) to a Corporation-designated brokerage
firm to effect the immediate sale of the vested shares purchased
under the option and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to
cover the aggregate Exercise Price payable for those shares plus
the applicable Federal, state and local income taxes required to
be withheld by the Corporation by reason of such exercise and (B)
to the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the
sale.
5.
<PAGE> 6
(iii) Appropriate documentation evidencing the
right to exercise this option shall be furnished the Corporation if the
person or persons exercising the option is other than Optionee.
(iv) Appropriate arrangement must be made with
the Corporation for the satisfaction of all Federal, state and local
income tax withholding requirements applicable to the option exercise.
(b) Except to the extent the sale and remittance procedure
specified above is utilized in connection with the exercise of the option for
vested Option Shares, payment of the Exercise Price for the purchased shares
must accompany the Exercise Notice or Purchase Agreement delivered to the
Corporation in connection with the option exercise.
(c) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate or certificates representing the
purchased Option Shares. To the extent any such Option Shares are unvested, the
certificates for those Option Shares shall be endorsed with an appropriate
legend evidencing the Corporation's repurchase rights and may be held in escrow
with the Corporation until such shares vest.
(d) In no event may this option be exercised for
fractional shares.
11. NO IMPAIRMENT OF RIGHTS. This Agreement shall not in any way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. Nor shall this Agreement in any way be construed or
interpreted so as to affect adversely or otherwise impair the right of the
Corporation or the stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
12. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the Nasdaq
National Market, if applicable) on which the Common Stock may be listed for
trading at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain approval
from any regulatory body having authority deemed by the Corporation to be
necessary to the lawful issuance and sale of any Common Stock pursuant to this
option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such
6.
<PAGE> 7
approval shall not have been obtained. However, the Corporation shall use its
best efforts to obtain all such applicable approvals.
13. SUCCESSORS AND ASSIGNS. Except to the extent otherwise
provided in Paragraph 3 or 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns and the legal representatives, heirs
and legatees of Optionee's estate.
14. GOVERNING LAW. The interpretation, performance, and
enforcement of this Agreement shall be governed by the laws of the State of
Delaware without resort to that State's conflict-of-laws rules.
15. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
7.
<PAGE> 8
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify ISS Group, Inc. (the "Corporation") that I elect
to purchase ____ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $____ per share (the "Exercise Price")
pursuant to that certain option (the "Option") granted to me on ____, 199_.
Concurrently with the delivery of this Exercise Notice to the
Secretary of the Corporation, I shall hereby pay to the Corporation the Exercise
Price for the Purchased Shares in accordance with the provisions of my agreement
with the Corporation evidencing the Option and shall deliver whatever additional
documents may be required by such agreement as a condition for exercise.
Alternatively, I may utilize the special broker/dealer sale and remittance
procedure specified in my agreement to effect payment of the Exercise Price for
any Purchased Shares in which I am vested at the time of exercise.
____________________ , 199_
Date
___________________________________
Optionee
Address:___________________________
___________________________________
___________________________________
Print name in exact manner
it is to appear on the
stock certificate:
___________________________________
Address to which certificate
is to be sent, if different
from address above:
___________________________________
___________________________________
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APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's stockholders, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of such period or
(B) have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (A) who were still in office at the time the Board approved such
election or nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
A-1.
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G. CORPORATION shall mean ISS Group, Inc., a Delaware corporation.
H. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 10 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price payable per share as
specified in the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option term expires
as specified in the Grant Notice.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as the price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for the Common
Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
determined by the Board to be the primary market for the Common Stock,
as such price is officially quoted in the composite tape of transactions
on such exchange. If there is no closing selling price for the Common
Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
L. GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.
M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying this Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
N. HOSTILE TAKE-OVER shall mean the acquisition, directly or indirectly,
by any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities
A-2.
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pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to accept.
O. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
P. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
Q. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option.
R. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
S. PERMANENT DISABILITY shall mean the inability of Optionee to perform
his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.
T. PURCHASE AGREEMENT shall mean the stock purchase agreement (in form
and substance satisfactory to the Corporation) which must be executed at the
time the option is exercised for unvested Option Shares and which will
accordingly (i) grant the Corporation the right to repurchase, at the Exercise
Price, any and all of those Option Shares in which Optionee is not otherwise
vested at the time of his or her cessation of service as a Board member and (ii)
preclude the sale, transfer or other disposition of any of the Option Shares
purchased under such agreement while those Option Shares remain subject to the
repurchase right.
U. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
V. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting the
Hostile Take-Over.
W. VESTING SCHEDULE shall mean the vesting schedule specified in the
Grant Notice, pursuant to which Optionee will vest in the Option Shares in one
or more installments over his or her period of Board service, subject to
acceleration in accordance with the provisions of the Agreement.
A-3.
