<PAGE> 1
As filed with the Securities and Exchange Commission on October 22, 1999
Registration No. 333-_____________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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ISS GROUP, INC.
(Exact name of issuer as specified in its charter)
DELAWARE 58-2362189
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
6600 PEACHTREE DUNWOODY ROAD, 300 EMBASSY ROW, SUITE 500
ATLANTA, GEORGIA 30328
(Address of principal executive offices) (Zip Code)
----------
ISS GROUP, INC.
1995 STOCK INCENTIVE PLAN
1999 EMPLOYEE STOCK PURCHASE PLAN
1999 INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN
NETREX, INC. 1998 STOCK PLAN
(Full title of the plans)
----------
THOMAS E. NOONAN
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
ISS GROUP, INC.
6600 PEACHTREE DUNWOODY ROAD
300 EMBASSY ROW, SUITE 500
ATLANTA, GEORGIA 30328
(Name and address of agent for service)
(678) 443-6000
(Telephone number, including area code, of agent for service)
----------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==========================================================================================================
Offering Amount of
Title of Securities to be Amount to be Price Aggregate Offering Registration
Registered Registered(1) per Share(2) Price Fee
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 Stock Incentive Plan 518,762 shares $31.50(2) $16,341,003.00(2) $4,542.80
- -------------------------
Common Stock, $0.001 par value
1999 Employee Stock Purchase Plan 360,000 shares $31.50(2) $11,340,000.00(2) $3,152.52
- ---------------------------------
Common Stock, $0.001 par value
1999 International Employee Stock 40,000 shares $31.50(2) $1,260,000.00(2) $350.28
- ---------------------------------
Purchase Plan
- -------------
Common Stock, $0.001 par value
Netrex, Inc. 1998 Stock Plan 509,793 shares $3.97(3) $2,023,878.21(3) $562.64
- ----------------------------
Common Stock
Aggregate Registration Fee $8,608.24
==========================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Registrant's Common Stock which become issuable under the Registrant's 1995
Stock Incentive Plan, 1999 Employee Stock Purchase Plan and the 1999
International Employee Stock Purchase Plan, and/or under the Netrex, Inc.
1998 Stock Plan by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the
<PAGE> 2
Registrant's receipt of consideration which results in an increase in the
number of the Registrant's outstanding shares of Common Stock.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the average of the high
and low selling prices per share of the Registrant's Common Stock on
October 19, 1999 as reported by the Nasdaq National Market.
(3) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the weighted average
exercise price of the outstanding options.
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<PAGE> 3
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain 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 Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 filed with the Commission on February 17,
1999;
(b) The Registrant's Current Report on Form 8-K filed with the
Commission on September 15, 1999;
(c) The Registrant's Quarterly Reports on Form 10-Q for period ended
March 31, 1999 filed with the Commission on May 13, 1999, and for
period ended June 30, 1999 filed with the Commission on August
13, 1999.
(d) The Registrant's Registration Statement No. 0-23655 on Form 8-A
filed with the Commission 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 Securities Exchange Act of
1934 (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 deregisters 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 Capital Stock
Inapplicable.
Item 5. Interests of Named Experts and Counsel
Inapplicable.
Item 6. Indemnification of Directors and Officers
Subsection (a) of Section 145 of the Delaware General Corporation
Law empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding whether civil, criminal, administrative or
investigative(other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause
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to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by right of the corporation to
procure a judgment in its favor by reason of the fact that such person acted in
any of the capacities set forth above, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect to any claim
issue or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 145 further provides that to the extent a director or
officer of a corporation has been successful on the merits or otherwise in the
defense of any such action, suit or proceeding referred to in subsections (a)
and (b) of Section 145 or in the defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith; that the indemnification
provided for by Section 145 shall not be deemed exclusive of any other rights
which the indemnified party may be entitled; that indemnification provided by
Section 145 shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of such person's heirs, executors and
administrators; and empowers the corporation to purchase and maintain insurance
on behalf of a director or officer of the corporation against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liabilities under Section 145.
Section 102(b)(7) of the Delaware General Corporation Law
provides that a certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that such provision shall not eliminate or limit the liability of the
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders,(ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law or (iv) for any transaction
from which the director derived an improper personal benefit.
Article Eleventh of the Registrant's charter provides that, to
the fullest extent permitted by the Delaware General Corporation Law as the same
exists or as it may hereafter be amended, no director of the Registrant shall be
personally liable to the Registrant or its stockholders for monetary damages for
breach of fiduciary duty as a director.
Section 6.1 of the Registrant's bylaws further provides that the
Registrant shall, to the maximum extent and in the manner permitted by the
Delaware General Corporation Law indemnify each of its directors and officers
against expenses(including attorneys' fees), judgments, fines, settlements, and
other amounts actually and reasonably incurred in connection with any
proceeding, arising by reason of the fact that such person is or was an agent of
the Registrant.
The Registrant has entered into indemnification agreements with
each of its directors and executive officers that provide for indemnification
and expense advancement to the fullest extent permitted under the Delaware
General Corporation Law.
The Registrant has purchased officers' and directors' liability
insurance.
The Registrant has agreed to indemnify certain directors and officers
against certain liabilities, including
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<PAGE> 5
liabilities under the Securities Act of 1933 (the "Securities Act"), pursuant to
Section 7 of the Amended and Restated Rights Agreement.
Item 7. Exemption from Registration Claimed
Inapplicable.
Item 8. Exhibits
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<S> <C>
4.0 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 0-22366 on Form 8-A, and
the exhibits thereto, and Amendment No. 1 thereto, which are
incorporated herein by reference pursuant to Item 3(d) of this
Registration Statement.
5.0 Opinion of Brobeck, Phleger & Harrison LLP. 23.1 Consent of Ernst
& Young LLP, Independent Auditors. 23.2 Consent of Brobeck,
Phleger & Harrison LLP is contained in Exhibit 5.
24.0 Power of Attorney. Reference is made to page II-5 of this
Registration Statement.
99.1 ISS Group, Inc. 1995 Stock Incentive Plan (as amended and
restated through December 4, 1997).
99.2* Form of Notice of Grant.
99.3* Form of Stock Option Agreement.
99.4* Addendum to Stock Option Agreement (Limited Stock Appreciation
Rights).
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 ISS Group, Inc. 1999 Employee Stock Purchase Plan.
99.10 Form of Stock Purchase Agreement.
99.11 Form of Enrollment/Change Form.
99.12 ISS Group, Inc. 1999 International Employee Stock Purchase Plan.
99.13 Form of Stock Purchase Agreement.
99.14 Form of Enrollment/Change Form.
99.15 Netrex, Inc. 1998 Stock Plan.
99.16 Form of Stock Option Agreement (Standard Form).
99.17 Form of Stock Option Agreement (Stock Repurchase Right Form).
</TABLE>
* Exhibits 99.2 through 99.8 are incorporated herein by reference to
Exhibits 99.2 through 99.8, respectively, of Registrant's Registration Statement
No. 333-53279 on Form S-8 which was filed with the SEC on May 21, 1998.
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 Securities Act of 1933, as amended (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 paragraphs 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 the
registration statement; (2) that for the purpose of determining any liability
under the 1933 Act each such post-effective amendment shall be deemed to
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<PAGE> 6
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; and (3) to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold upon the termination of the 1995 Stock Incentive Plan or the 1999
Employee Stock Purchase Plan or the 1999 International Employee Stock Purchase
Plan or the Netrex, Inc. 1998 Stock Plan.
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 and controlling persons of the
Registrant pursuant to the indemnification provisions summarized in Item 6
above, 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.
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<PAGE> 7
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 20th day of
October, 1999.
ISS GROUP, INC.
By /s/ Thomas E. Noonan
------------------------------------------------
Thomas E. Noonan
Chairman, President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned officers and directors of ISS GROUP, INC., a
Delaware corporation, do hereby constitute and appoint Thomas E. Noonan, Richard
Macchia and Jon Ver Steeg, the lawful attorneys and agents, with full power and
authority to do any and all acts and things and to execute any and all
instruments which said attorney and agent determines 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 all that said attorneys and agents, or
any 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>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Thomas E. Noonan
- ----------------------------- Chairman, President and Chief Executive October 20, 1999
Thomas E. Noonan Officer (Principal Executive Officer)
</TABLE>
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<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Christopher W. Klaus
- ----------------------------- Chief Technology Officer, October 20, 1999
Christopher W. Klaus Secretary and Director
/s/ Richard Macchia
- ----------------------------- Vice President and Chief Financial October 20, 1999
Richard Macchia Officer (Principal Financial and
Accounting Officer)
/s/ Richard S. Bodman
- ----------------------------- Director October 20, 1999
Richard S. Bodman
/s/ Robert E. Davoli
- ----------------------------- Director October 20, 1999
Robert E. Davoli
/s/ Kevin J. O'Connor
- ----------------------------- Director October 20, 1999
Kevin J. O'Connor
/s/ David N. Strom
- ----------------------------- Director October 20, 1999
David N. Strom
</TABLE>
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<S> <C>
4.0 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 0-22366 on Form 8-A, and
the exhibits thereto, and Amendment No. 1 thereto, which are
incorporated herein by reference pursuant to Item 3(d) of this
Registration Statement.
5.0 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24.0 Power of Attorney. Reference is made to page II-5 of this
Registration Statement.
99.1 ISS Group, Inc. 1995 Stock Incentive Plan (as amended and
restated through December 4, 1997).
99.2* Form of Notice of Grant.
99.3* Form of Stock Option Agreement.
99.4* Addendum to Stock Option Agreement (Limited Stock Appreciation
Rights).
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 ISS Group, Inc. 1999 Employee Stock Purchase Plan.
99.10 Form of Stock Purchase Agreement.
99.11 Form of Enrollment/Change Form.
99.12 ISS Group, Inc. 1999 International Employee Stock Purchase Plan.
99.13 Form of Stock Purchase Agreement.
99.14 Form of Enrollment/Change Form.
99.15 Netrex, Inc. 1998 Stock Plan.
99.16 Form of Stock Option Agreement (Standard Form).
99.17 Form of Stock Option Agreement (Stock Repurchase Right Form).
</TABLE>
* Exhibits 99.2 through 99.8 are incorporated herein by reference to
Exhibits 99.2 through 99.8, respectively, of Registrant's Registration Statement
No. 333-53279 on Form S-8 which was filed with the SEC on May 21, 1998.
<PAGE> 1
EXHIBIT 5
OPINION OF BROBECK, PHLEGER & HARRISON LLP
October 22, 1999
ISS Group, Inc.
6600 Peachtree-Dunwoody Road
300 Embassy Row, Suite 500
Atlanta, Georgia 30328
Re: ISS Group, Inc. Registration Statement on Form S-8 for
an aggregate of 1,428,555 Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel to ISS Group, Inc., a Delaware
corporation (the "Company"), in connection with the registration on Form S-8
(the "Registration Statement") under the Securities Act of 1933, as amended, of
(i) an additional 518,762 shares of the Company's common stock ("Common Stock")
authorized for issuance under the Company's 1995 Stock Incentive Plan (the
"Option Plan"), (ii) an initial reserve of 360,000 shares of Common Stock of the
Company under the Company's 1999 Employee Stock Purchase Plan (the "Purchase
Plan"), (iii) 40,000 shares of Common Stock of the Company under the Company's
1999 International Employee Stock Plan (the "International Plan"), and (iv) an
aggregate of 509,793 shares of Common Stock and related stock options under the
Netrex, Inc. 1998 Stock Plan (the "Netrex Plan").
This opinion is being furnished in accordance with the
requirements of Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the
corporate proceedings taken by the Company in connection with the establishment
and amendment of the Option Plan, Purchase Plan, International Plan and with the
assumption of the Netrex Plan and the options outstanding thereunder. Based on
such review, we are of the opinion that if, as and when the shares of Common
Stock are issued and sold (and the consideration therefor received) pursuant to
the provisions of option agreements duly authorized under the Option Plan and
the Netrex Plan, and the stock purchase agreements under the Purchase Plan and
the International Plan, and in accordance with the Registration Statement, such
shares will be duly authorized, legally issued, fully paid and non-assessable.
We consent to the filing of this opinion letter as Exhibit 5.1 to
the Registration Statement.
This opinion letter is rendered as of the date first written
above and we disclaim any obligation to advise you of facts, circumstances,
events or developments which hereafter may be brought to our attention and which
may alter, affect or modify the opinion expressed herein. Our opinion is
expressly limited to the matters set forth above and we render no opinion,
whether by implication or otherwise, as to any other matters relating to the
Company, the Option Plan, the Purchase Plan, the International Plan and the
Netrex Plan or the shares of Common Stock issuable under such plans.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to incorporation by reference in the Registration Statement on Form
S-8 pertaining to the 1995 Stock Incentive Plan, the 1999 Employee Stock
Purchase Plan and 1999 International Employee Stock Purchase Plan of ISS Group,
Inc., and the Netrex, Inc. 1998 Stock Plan, of our report dated January 15, 1999
with respect to the consolidated financial statements and schedule of ISS Group,
Inc. included in its Annual Report on Form 10-K for the year ended December 31,
1998 filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Atlanta, Georgia
October 21, 1999
<PAGE> 1
EXHIBIT 99.1
ISS GROUP, INC.
1995 STOCK OPTION PLAN
(AS AMENDED AND RESTATED THROUGH December 4, 1997)
<PAGE> 2
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.
III. ADMINISTRATION OF THE PLAN
A. Prior to the Section 12(g) Registration Date, the Plan shall be
administered by the Board.
<PAGE> 3
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,
(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.
2
<PAGE> 4
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 3,518,762
shares(1).
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.
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
- --------
(1) Includes the 518,762 share increase effected on January 4, 1999
pursuant to Section V.B. of the Plan.
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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.
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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 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.
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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 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:
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<PAGE> 8
(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.
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
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<PAGE> 9
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.
A. 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). 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.
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<PAGE> 10
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
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
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<PAGE> 11
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.
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
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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.
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 Optionee's 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:
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(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:
(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.
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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.
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.
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<PAGE> 15
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 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
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<PAGE> 16
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 required to execute such agreements as the Corporation
or the underwriters request in connection with the Market Stand-Off.
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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.
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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).
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
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<PAGE> 19
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.
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<PAGE> 20
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.
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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.
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<PAGE> 22
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.
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
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<PAGE> 23
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.
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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 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.
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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.
(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.
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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).
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
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<PAGE> 27
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.
BB. 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.
CC. 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.
DD. 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.
EE. 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.
FF. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.
GG. 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.
HH. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
effect under the Plan.
II. 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
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<PAGE> 28
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.
JJ. 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.
KK. 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.
LL. 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).
MM. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
NN. 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.
<PAGE> 1
EXHIBIT 99.9
ISS GROUP, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
<PAGE> 2
ISS GROUP, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the
interests of ISS Group, Inc., a Delaware corporation, by providing eligible
employees with the opportunity to acquire a proprietary interest in the
Corporation through participation in a payroll-deduction based employee stock
purchase plan designed to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares of Common
Stock purchased on the open market. The maximum number of shares of Common Stock
which may be issued in the aggregate under the Plan and the International Plan
shall not exceed Four Hundred Thousand (400,000) shares. The number of shares
available in the aggregate under the Plan and the International Plan shall
increase on the first trading day of each calendar year beginning in the year
2000 by 50,000 shares.
B. 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 class of securities issuable under
the Plan, (ii) the maximum number and class of securities by which the share
reserve will increase each year, (iii) the maximum number and class of
securities purchasable per Participant on any one Purchase Date and (iv) the
number and class of securities and the price per share in effect under each
outstanding purchase right in order to prevent the dilution or enlargement of
benefits thereunder.
IV. PURCHASE PERIODS
A. Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive purchase periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.
<PAGE> 3
B. Each purchase period shall have a duration of six (6) months.
Purchase periods shall run from the first business day in February to the last
business day in July each year and from the first business day in August to the
last business day in January of the following year. However, the first purchase
period shall commence on the Effective Date and terminate on the last business
day in January 2000.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start date of
any purchase period under the Plan may enter that purchase period on such start
date.
B. To participate in the Plan for a particular purchase period, the
Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization) and file such forms with the Plan Administrator (or its
designate) on or before the start date of the purchase period.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for purposes
of acquiring shares of Common Stock under the Plan may be any multiple of one
percent (1%) of the Base Salary paid to the Participant during each purchase
period, up to a maximum of ten percent (10%). The deduction rate so authorized
shall continue in effect throughout the purchase period. The Participant may not
increase his or her rate of payroll deduction during a purchase period. However,
the Participant may, at any time during the purchase period, reduce his or her
rate of payroll deduction to become effective as soon as possible after filing
the appropriate form with the Plan Administrator. The Participant may not,
however, effect more than one (1) such reduction per purchase period.
B. Payroll deductions shall begin on the first pay day following
the start date of the purchase period and shall (unless sooner terminated by the
Participant) continue through the pay day ending with or immediately prior to
the last day of the purchase period. The amounts so collected shall be credited
to the Participant's book account under the Plan, but no interest shall be paid
on the balance from time to time outstanding in such account. The amounts
collected from the Participant shall not be required to be held in any
segregated account or trust fund and may be commingled with the general assets
of the Corporation and used for general corporate purposes.
C. Payroll deductions shall automatically cease upon the termination
of the Participant's purchase right in accordance with the provisions of the
Plan.
D. The Participant's acquisition of Common Stock under the Plan on
any Purchase Date shall neither limit nor require the Participant's acquisition
of Common Stock on any subsequent Purchase Date.
VII. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a
separate purchase right on the start date of each purchase period in which he or
she participates. The
2
<PAGE> 4
purchase right shall provide the Participant with the right to purchase shares
of Common Stock on the Purchase Date upon the terms set forth below. The
Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator
may deem advisable.
Under no circumstances shall purchase rights be granted under the
Plan to any Eligible Employee if such individual would, immediately after the
grant, own (within the meaning of Code Section 424(d)) or hold outstanding
options or other rights to purchase, stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Corporation or any Corporate Affiliate.
B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall be
automatically exercised on the Purchase Date, and shares of Common Stock shall
accordingly be purchased on behalf of each Participant (other than Participants
whose payroll deductions have previously been refunded pursuant to the
Termination of Purchase Right provisions below) on each such Purchase Date. The
purchase shall be effected by applying the Participant's payroll deductions for
the purchase period ending on such Purchase Date to the purchase of whole shares
of Common Stock at the purchase price in effect for that purchase period.
C. PURCHASE PRICE. The purchase price per share at which Common
Stock will be purchased on the Participant's behalf on each Purchase Date shall
be equal to eighty-five percent (85%) of the lower of (i) the Fair Market Value
per share of Common Stock on the start date of the purchase period or (ii) the
Fair Market Value per share of Common Stock on that Purchase Date.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of Common
Stock purchasable by a Participant on each Purchase Date shall be the number of
whole shares obtained by dividing the amount collected from the Participant
through payroll deductions during the purchase period ending with that Purchase
Date by the purchase price in effect for the Participant for that Purchase Date.
However, the maximum number of shares of Common Stock purchasable per
Participant on any one Purchase Date shall not exceed the lesser of (i) 1,500
shares or (ii) the number of shares determined by dividing Five Thousand Dollars
($5,000) by the purchase price in effect for that Purchase Date and such number
shall in no event exceed 1,500 shares.
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not applied to
the purchase of shares of Common Stock on any Purchase Date because they are not
sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable by the Participant on the
Purchase Date shall be promptly refunded.
F. TERMINATION OF PURCHASE RIGHT. The following provisions shall
govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the last day of the
purchase period, terminate his or her outstanding purchase right by
filing the
3
<PAGE> 5
appropriate form with the Plan Administrator (or its designate), and no
further payroll deductions shall be collected from the Participant with
respect to the terminated purchase right. Any payroll deductions
collected during the purchase period in which such termination occurs
shall be refunded as soon as possible.
(ii) The termination of such purchase right shall be irrevocable,
and the Participant may not subsequently rejoin the purchase period for
which the terminated purchase right was granted. In order to resume
participation in any subsequent purchase period, such individual must
re-enroll in the Plan (by making a timely filing of the prescribed
enrollment forms) on or before the start date of the new purchase
period.
(iii) Should the Participant cease to remain an Eligible Employee
for any reason (including death, disability or change in status) while
his or her purchase right remains outstanding, then that purchase right
shall immediately terminate, and all of the Participant's payroll
deductions for the purchase period in which the purchase right so
terminates shall be immediately refunded. Should the Participant cease
to remain in active service by reason of an approved unpaid leave of
absence all of the Participant's payroll deductions for the purchase
period in which the approved unpaid leave of absence began shall be
immediately refunded. In no event shall any further payroll deductions
be collected on the Participant's behalf during such leave. Upon the
Participant's return to active service (i) within ninety (90) days
following the commencement of such leave or, (ii) prior to the
expiration of any longer period for which such Participant's right to
reemployment with the Corporation is guaranteed by either statute or
contract, his or her payroll deductions under the Plan shall
automatically resume at the rate in effect at the time the leave began.
However, should the Participant's leave of absence exceed ninety (90)
days and his or her re-employment rights not be guaranteed by either
statute or contract, then the Participant's status as an Eligible
Employee will be deemed to terminate on the ninety-first (91st) day of
that leave, and such Participant's purchase right for the purchase
period in which that leave began shall thereupon terminate. An
individual who returns to active employment following such a leave shall
be treated as a new Employee for purposes of the Plan and must, in order
to resume participation in the Plan, re-enroll in the Plan (by making a
timely filing of the prescribed enrollment forms) on or before the start
date of the new purchase period.
G. CHANGE IN CONTROL. Each outstanding purchase right shall
automatically be exercised, immediately prior to the effective date of any
Change in Control by applying the payroll deductions of each Participant for the
purchase period in which such Change in Control occurs to the purchase of whole
shares of Common Stock at a purchase price per share equal to eighty-five
percent (85%) of the lower of (i) the Fair Market Value per share of Common
Stock on the start date of the purchase period in which such Change in Control
occurs or (ii) the Fair Market Value per share of Common Stock immediately prior
to the effective date of such Change in Control. However, the applicable
limitation on the number of shares of Common Stock purchasable per Participant
shall continue to apply to any such purchase.
4
<PAGE> 6
The Corporation shall use its best efforts to provide at least
ten (10)-days prior written notice of the occurrence of any Change in Control,
and Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Change in Control.
H. PRORATION OF PURCHASE RIGHTS. Should the total number of shares
of Common Stock to be purchased pursuant to outstanding purchase rights on any
particular date exceed the number of shares then available for issuance under
the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. ASSIGNABILITY. The purchase right shall be exercisable only by
the Participant and shall not be assignable or transferable by the Participant.
J. STOCKHOLDER RIGHTS. A Participant shall have no stockholder
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (i) rights to purchase Common
Stock accrued under any other purchase right granted under this Plan and (ii)
similar rights accrued under other employee stock purchase plans (within the
meaning of Code Section 423) of the Corporation or any Corporate Affiliate,
would otherwise permit such Participant to purchase more than Twenty-Five
Thousand Dollars ($25,000) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value per share on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.
B. For purposes of applying such accrual limitations to the purchase
rights granted under the Plan, the following provisions shall be in effect:
(i) The right to acquire Common Stock under each outstanding
purchase right shall accrue on the Purchase Date in effect for the
period on which such right is granted.
(ii) No right to acquire Common Stock under any outstanding
purchase right shall accrue to the extent the Participant has already
accrued in the same calendar year the right to acquire Common Stock
under one (1) or more other purchase rights at a rate equal to
Twenty-Five Thousand Dollars ($25,000) worth of Common Stock (determined
on the basis of the Fair Market Value per share on the date or dates of
grant) for each calendar year such rights were at any time outstanding.
5
<PAGE> 7
C. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular purchase period, then the payroll
deductions which the Participant made during that purchase period with respect
to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions of this
Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on March 31, 1999 and shall
become effective on the Effective Date, provided no purchase rights granted
under the Plan shall be exercised, and no shares of Common Stock shall be issued
hereunder, until (i) the Plan shall have been approved by the stockholders of
the Corporation and (ii) the Corporation shall have complied with all applicable
requirements of the 1933 Act (including the registration of the shares of Common
Stock issuable under the Plan on a Form S-8 registration statement filed with
the Securities and Exchange Commission), all applicable listing requirements of
any stock exchange (or the Nasdaq National Market, if applicable) on which the
Common Stock is listed for trading and all other applicable requirements
established by law or regulation. In the event such stockholder approval is not
obtained, or such compliance is not effected, within twelve (12) months after
the date on which the Plan is adopted by the Board, the Plan shall terminate and
have no further force or effect, and all sums collected from Participants during
the initial purchase period hereunder shall be refunded.
B. Unless sooner terminated by the Board, the Plan shall terminate
upon the earliest of (i) the last business day in July 2009, (ii) the date on
which all shares available for issuance under the Plan shall have been sold
pursuant to purchase rights exercised under the Plan or (iii) the date on which
all purchase rights are exercised in connection with a Corporate Transaction. No
further purchase rights shall be granted or exercised, and no further payroll
deductions shall be collected, under the Plan following such termination.
X. AMENDMENT/TERMINATION OF THE PLAN
A. The Board may alter, amend, suspend or terminate the Plan at any
time to become effective immediately following the close of any purchase period.
However, the Plan may be amended or terminated immediately upon Board action, if
and to the extent necessary to assure that the Corporation will not recognize,
for financial reporting purposes, any compensation expense in connection with
the shares of Common Stock offered for purchase under the Plan, should the
financial accounting rules applicable to the Plan at the Effective Time be
subsequently revised so as to require the recognition of compensation expense in
the absence of such amendment or termination.
B. In no event may the Board effect any of the following amendments
or revisions to the Plan without the approval of the Corporation's stockholders:
(i) increase the number of shares of Common Stock issuable under the Plan or the
maximum number of shares purchasable per Participant on any one Purchase Date,
except for permissible adjustments in the
6
<PAGE> 8
event of certain changes in the Corporation's capitalization, (ii) alter the
purchase price formula so as to reduce the purchase price payable for the shares
of Common Stock purchasable under the Plan or (iii) modify eligibility
requirements for participation in the Plan.
XI. GENERAL PROVISIONS
A. Nothing in the Plan shall confer upon the Participant any right
to continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.
B. All costs and expenses incurred in the administration of the Plan
shall be paid by the Corporation; however, each Plan Participant shall bear all
costs and expenses incurred by such individual in the sale or other disposition
of any shares purchased under the Plan.
C. The provisions of the Plan shall be governed by the laws of the
State of Georgia without resort to that State's conflict-of-laws rules.
7
<PAGE> 9
SCHEDULE A
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE DATE
ISS Group, Inc.
Internet Security Systems, Inc.
ISS Investment Holdings, Inc.
<PAGE> 10
APPENDIX
The following definitions shall be in effect under the Plan:
A. BASE SALARY shall mean the (i) regular base salary paid to a
Participant by one or more Participating Companies during such individual's
period of participation in one or more Purchase Periods under the Plan plus (ii)
any pre-tax contributions made by the Participant to any Code Section 401(k)
salary deferral plan or any Code Section 125 cafeteria benefit program now or
hereafter established by the Corporation or any Corporate Affiliate. However,
Base Salary shall not include overtime payments, bonuses, commissions,
profit-sharing distributions and other incentive-type payments or any
contributions (other than Code Section 401(k) or Code Section 125 contributions)
made on the Participant's behalf by the Corporation or any Corporate Affiliate
to any deferred compensation plan or welfare benefit program now or hereafter
established.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean any of the following transactions
effecting a change in ownership or control of the Corporation:
(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,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation, or
(iii) 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.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE AFFILIATE shall mean any parent or subsidiary
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.
A-1
<PAGE> 11
G. CORPORATION shall mean ISS Group, Inc., a Delaware corporation,
and any corporate successor to all or substantially all of the assets or voting
stock of ISS Group, Inc. which shall by appropriate action adopt the Plan.
H. EFFECTIVE DATE shall mean July 1, 1999. Any Corporate Affiliate
which becomes a Participating Corporation after such Effective Date shall
designate a subsequent Effective Date with respect to its employee-Participants.
I. ELIGIBLE EMPLOYEE shall mean any person who is employed by a
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section
3401(a).
J. 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 such 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.
K. INTERNATIONAL PLAN shall mean the Corporation's 1999
International Employee Stock Purchase Plan.
L. 1933 ACT shall mean the Securities Act of 1933, as amended.
M. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
N. PARTICIPANT shall mean any Eligible Employee of a Participating
Corporation who is actively participating in the Plan.
O. PARTICIPATING CORPORATION shall mean the Corporation and such
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan are listed in attached Schedule A.
A-2
<PAGE> 12
P. PLAN shall mean the Corporation's 1999 Employee Stock Purchase
Plan, as set forth in this document.
Q. PLAN ADMINISTRATOR shall mean the committee of two (2) or more
Board members appointed by the Board to administer the Plan.
R. PURCHASE DATE shall mean the last business day of each purchase
period. The initial Purchase Date shall be January 31, 2000.
S. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.
A-3
<PAGE> 1
EXHIBIT 99.10
FORM OF STOCK PURCHASE AGREEMENT
<PAGE> 2
ISS GROUP, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
STOCK PURCHASE AGREEMENT
I hereby elect to participate in the 1999 Employee Stock Purchase
Plan (the "ESPP") for the purchase period specified below, and I hereby
subscribe to purchase shares of Common Stock of ISS Group, Inc. (the
"Corporation") in accordance with the provisions of this Agreement and the ESPP.
I hereby authorize payroll deductions from each of my paychecks following my
entry into the ESPP in the 1% multiple of my base salary (not to exceed a
maximum of 10%) specified in my attached Enrollment Form.
Purchase periods under the ESPP will run from the first business
day in February to the last business day in July each year and from the first
business day in August to the last business day in January of the following
year. The initial purchase period under the ESPP will begin on July 1, 1999 and
end on January 31, 2000. My participation will automatically remain in effect
from one purchase period to the next in accordance with my payroll deduction
authorization, unless I withdraw from the ESPP or change the rate of my payroll
deduction or unless my employment status changes. I may reduce the rate of my
payroll deductions on one occasion per purchase period, and I may increase my
rate of payroll deductions to become effective at the beginning of any
subsequent purchase period.
My payroll deductions will be accumulated for the purchase of
shares of the Corporation's Common Stock on the last business day of each
purchase period. The purchase price per share will be equal to 85% of the lower
of (i) the fair market value per share of Common Stock on the start date of the
purchase period or (ii) the fair market value per share on the purchase date. I
will also be subject to ESPP restrictions (i) limiting the maximum number of
shares which I may purchase per purchase period and (ii) prohibiting me from
purchasing more than $25,000 worth of Common Stock for each calendar year my
purchase right remains outstanding.
I may withdraw from the ESPP at any time prior to the last day of
the purchase period and the Corporation will refund all my payroll deductions
for that period. However, I may not rejoin that particular purchase period at
any later date. Upon the termination of my employment for any reason, including
death or disability, or my loss of eligible employee status, my participation in
the ESPP will immediately cease, and all my payroll deductions for the purchase
period in which my employment terminates or my loss of eligibility occurs will
immediately be refunded.
If I take an unpaid leave of absence, my payroll deductions will
immediately cease, and any payroll deductions for the purchase period in which
my leave begins will be refunded. If my re-employment is guaranteed by either
law or contract, or if I return to active service within ninety (90) days, then
upon my return my payroll deductions will automatically resume at the rate in
effect when my leave began.
The Corporation will issue a stock certificate for the shares
purchased on my behalf after the end of each purchase period. The certificate
will be issued in street name and will be deposited directly in my
Corporation-designated brokerage account. I will notify the Corporation of any
disposition of shares purchased under the ESPP, and I will satisfy all
applicable income and employment tax withholding requirements at the time of
such disposition.
The Corporation has the right, exercisable in its sole
discretion, to amend or terminate all outstanding purchase rights under the ESPP
at any time, with such amendment or termination to become effective immediately
following the end of any purchase period. However, such purchase rights may be
amended or terminated with an immediate effective date to the extent necessary
to avoid the Corporation's recognition of compensation expense for financial
reporting purposes, should the accounting principles applicable to the ESPP
change. Upon any such termination, I will cease to have any further rights to
purchase shares of Common Stock under this Agreement.
I have read this Agreement and hereby agree to be bound by the
terms of both this Agreement and the ESPP. The effectiveness of this Agreement
is dependent upon my eligibility to participate in the ESPP.
Date: ________, 199__ Signature of Employee _________________________
Printed Name: _________________________________
Enrollment Effective Purchase Period Beginning:
[ ] July 1,1999
[ ] February 1, 200__
[ ] August 1, 200__
<PAGE> 1
EXHIBIT 99.11
FORM OF ENROLLMENT/CHANGE FORM
<PAGE> 2
ISS GROUP, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN ("ESPP")
ENROLLMENT/CHANGE FORM
<TABLE>
<S> <C> <C>
SECTION 1: Action Complete Sections:
------------------ ------------------
ACTIONS [ ] New Enrollment 2, 3, 7 and sign attached Stock
[ ] Payroll Deduction Change Purchase Agreement
[ ] Terminate Payroll Deductions 2, 4, 7
[ ] Leave of Absence 2, 5, 7
2, 6, 7
________________________________________________________________________________
SECTION 2: Name________________________________________________________________
PERSONNEL Last First MI Dept.
DATA
Home Address________________________________________________________
Street
________________________________________________________
City State Zip Code
Social Security #__ ___ ___ - ___ ___ - ___ ___ ___ ___
_______________________________________________________________________________________________________
SECTION 3:
Effective with the Purchase
Period Beginning: Payroll Deduction Amount: __% of base
salary(*)
NEW
ENROLLMENT [ ] February 1,____
(*) Must be a multiple of 1% up to a
maximum of 10% of base salary
[ ] August 1,
[ ] Initial Purchase Period - July 1, 1999
_______________________________________________________________________________________________________
SECTION 4: Effective with the I authorize the following new
Pay Period Beginning:____________________________ level of payroll deduction:
PAYROLL Month, Day and Year ______% of base salary
DEDUCTION (*) Must be a multiple of 1% up
CHANGE to a maximum of 10% of base salary
NOTE: You may reduce your rate of payroll deductions once per
6-month purchase period to become effective as soon as
possible following the filing of the change form. You may
also increase your rate of payroll deductions to become
effective as of the start date of the next 6-month
purchase period.
_______________________________________________________________________________________________________
SECTION 5: Effective with the Your election to terminate your payroll
Pay Period Beginning:_______________________ deductions for the balance of the
Month, Day and Year purchase period cannot be changed,
TERMINATE and you may not rejoin the purchase
PAYROLL period at a later date. You will not be
DEDUCTIONS able to resume participation in the ESPP
until the start of the next purchase period.
Upon my voluntary termination of payroll deductions, all payroll
deductions collected during the current purchase period will be
refunded.
NOTE: If your employment terminates for any reason or your
eligibility status changes (<20 hrs/wk or <5 months/yr),
you will immediately cease to participate in the ESPP, and
your ESPP payroll deductions collected in that purchase
period will automatically be refunded to you.
_______________________________________________________________________________________________________
SECTION 6: In connection with my leave of absence, I elect the following
action with respect to my ESPP payroll deductions to date:
LEAVE OF
ABSENCE [ ] Purchase shares of ISS Group, Inc. on next scheduled purchase date
OR
[ ] Refund ESPP payroll deductions collected
NOTE: If you take an unpaid leave of absence, your payroll
deductions will immediately cease. If you return to active
status within 90 days after the start of your leave, your
payroll deductions will at that time automatically resume
at the rate in effect for you when your leave began.
_______________________________________________________________________________________________________
SECTION 7:
AUTHORIZATION
_______________________________________________ _____________________________________
Date Signature of Employee
</TABLE>
<PAGE> 1
EXHIBIT 99.12
ISS GROUP, INC.
INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN
<PAGE> 2
EXHIBIT 99.12
ISS GROUP, INC.
INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE OF THE PLAN
This International Employee Stock Purchase Plan is intended to
promote the interests of ISS Group, Inc., a Delaware corporation, by providing
eligible employees with the opportunity to acquire a proprietary interest in the
Corporation through the purchase of shares of the Corporation's Common Stock at
periodic intervals.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary. Decisions of the Plan
Administrator shall be final and binding on all parties having an interest in
the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares of Common
Stock purchased on the open market. The maximum number of shares of Common Stock
which may be issued in the aggregate under the Plan and the U.S. Plan shall be
limited to Four Hundred Thousand (400,000) shares. The number of shares
available in the aggregate under the Plan and the International Plan shall
increase on the first trading day of each calendar year beginning in the year
2000 by 50,000 shares.
B. 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 class of securities issuable under
the U.S. Plan, (ii) the maximum number and class of securities by which the
share reserve will increase each year, (iii) the maximum number and class of
securities purchasable per Participant on any one Purchase Date and (iv) the
number and class of securities and the price per share in effect under each
outstanding purchase right in order to prevent the dilution or enlargement of
benefits thereunder.
IV. PURCHASE PERIODS
A. Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive purchase periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.
<PAGE> 3
B. Each purchase period shall have a duration of six (6) months.
Purchase periods shall run from the first business day in February to the last
business day in July each year and from the first business day in August to the
last business day in January of the following year. However, the first purchase
period shall commence on the Effective Date and terminate on the last business
day in January 2000.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start date of
any purchase period under the Plan may enter that purchase period on such start
date.
B. To participate in the Plan for a particular purchase period, the
Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization) and file such forms with the Plan Administrator (or its
designate) on or before the start date of the purchase period.
VI. PAYROLL DEDUCTIONS
A. Except to the extent otherwise provided in the Plan (or any
addendum thereto) or authorized by the Plan Administrator, the purchase price
for the shares of Common Stock acquired under the Plan shall be paid from
accumulated payroll deductions authorized by the Participant.
B. The payroll deduction authorized by the Participant for purposes
of acquiring shares of Common Stock under the Plan may be any multiple of one
percent (1%) of the Base Salary paid to the Participant during each purchase
period, up to a maximum of ten percent (10%). The payroll deduction authorized
by the Participant shall be collected in the currency in which paid by the
Foreign Subsidiary. The payroll deductions collected during each purchase period
shall be converted into U.S. Dollars on the Purchase Date for that purchase
period on the basis of the exchange rate in effect on that date. The Plan
Administrator shall have the absolute discretion to determine the applicable
exchange rate to be in effect for each Purchase Date by any reasonable method
that may be based on the exchange rate actually available in the ordinary course
of business on such date. Any changes or fluctuations in the exchange rate at
which the payroll deductions collected on the Participant's behalf are converted
into U.S. Dollars on each Purchase Date shall be borne solely by the
Participant.
C. The rate of payroll deduction so authorized by the Participant
shall continue in effect throughout the purchase period that the Participant
remains in the Plan. The Participant may not increase his or her rate of payroll
deduction during a purchase period. However, the Participant may, at any time
during the purchase period, reduce his or her rate of payroll deduction to
become effective as soon as possible after filing the appropriate form with the
Plan Administrator. The Participant may not, however, effect more than one (1)
such reduction per purchase period.
D. Payroll deductions shall begin on the first pay day following the
start date of the purchase period and shall (unless sooner terminated by the
Participant) continue through the pay day ending with or immediately prior to
the last day of the purchase period. The amounts so collected shall be credited
to the Participant's book account under the Plan, initially
2
<PAGE> 4
in the currency in which paid by the Foreign Subsidiary until converted into
U.S. Dollars on the applicable Purchase Date. Except to the extent otherwise
provided by the Plan (including any addendum thereto) or by the Plan
Administrator, no interest shall be paid on the balance from time to time
outstanding in any book account and the amounts collected from the Participant
shall not be required to be held in any segregated account or trust fund and may
be commingled with the general assets of the Corporation and used for general
corporate purposes.
E. Payroll deductions shall automatically cease upon the termination
of the Participant's purchase right in accordance with the provisions of the
Plan.
F. The Participant's acquisition of Common Stock under the Plan on
any Purchase Date shall neither limit nor require the Participant's acquisition
of Common Stock on any subsequent Purchase Date.
VII. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a
separate purchase right on the start date of each purchase period in which he or
she participates. The purchase right shall provide the Participant with the
right to purchase shares of Common Stock on the Purchase Date upon the terms set
forth below. The Participant shall execute such document or documents embodying
such terms and such other provisions (not inconsistent with the Plan) as the
Plan Administrator may deem advisable.
Under no circumstances shall purchase rights be granted under the
Plan to any Eligible Employee if such individual would, immediately after the
grant, own (within the meaning of Code Section 424(d)) or hold outstanding
options or other rights to purchase, stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Corporation or any Corporate Affiliate.
B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall be
automatically exercised on the Purchase Date, and shares of Common Stock shall
accordingly be purchased on behalf of each Participant (other than Participants
whose payroll deductions have previously been refunded pursuant to the
Termination of Purchase Right provisions below) on each such Purchase Date. The
purchase shall be effected by applying the Participant's payroll deductions for
the purchase period ending on such Purchase Date to the purchase of whole shares
of Common Stock at the purchase price in effect for that purchase period.
C. PURCHASE PRICE. The purchase price per share at which Common
Stock will be purchased on the Participant's behalf on each Purchase Date shall
be equal to eighty-five percent (85%) of the lower of (i) the Fair Market Value
per share of Common Stock on the start date of the purchase period or (ii) the
Fair Market Value per share of Common Stock on that Purchase Date.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of Common
Stock purchasable by a Participant on each Purchase Date shall be the number of
whole shares obtained by dividing the amount collected from the Participant
through payroll deductions as converted into U.S. Dollars during the purchase
period ending with that Purchase Date by the purchase price in effect for the
Participant for that Purchase Date. However, the maximum
3
<PAGE> 5
number of shares of Common Stock purchasable per Participant on any one Purchase
Date shall not exceed the lesser of (i) 1,500 shares or (ii) the number of
shares determined by dividing Five Thousand Dollars ($5,000) by the purchase
price in effect for that Purchase Date and such number shall in no event exceed
1,500 shares.
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not applied to
the purchase of shares of Common Stock on any Purchase Date because they are not
sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable by the Participant on the
Purchase Date shall be promptly refunded in the currency in which payroll (from
which such deductions were made) was paid to the Participant by the Foreign
Subsidiary.
F. TERMINATION OF PURCHASE RIGHT. The following provisions shall
govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the last day of the
purchase period, terminate his or her outstanding purchase right by
filing the appropriate form with the Plan Administrator (or its
designate), and no further payroll deductions shall be collected from
the Participant with respect to the terminated purchase right. Any
payroll deductions collected during the purchase period in which such
termination occurs shall be refunded as soon as possible.
(ii) The termination of such purchase right shall be irrevocable,
and the Participant may not subsequently rejoin the purchase period for
which the terminated purchase right was granted. In order to resume
participation in any subsequent purchase period, such individual must
re-enroll in the Plan (by making a timely filing of the prescribed
enrollment forms) on or before the start date of the new purchase
period.
(iii) Should the Participant cease to remain an Eligible Employee
for any reason (including death, disability or change in status) while
his or her purchase right remains outstanding, then that purchase right
shall immediately terminate, and all of the Participant's payroll
deductions for the purchase period in which the purchase right so
terminates shall be immediately refunded in the currency in which
payroll (from which deductions were made) was paid to the Participant by
the Foreign Subsidiary. Should the Participant cease to remain in active
service by reason of an approved unpaid leave of absence all of the
Participant's payroll deductions for the purchase period in which the
approved unpaid leave of absence began shall be immediately refunded. In
no event shall any further payroll deductions be collected on the
Participant's behalf during such leave. Upon the Participant's return to
active service (i) within ninety (90) days following the commencement of
such leave or, (ii) prior to the expiration of any longer period for
which such Participant's right to reemployment with the Corporation is
guaranteed by either statute or contract, his or her payroll deductions
under the Plan shall automatically resume at the rate in effect at the
time the leave began. However, should the Participant's leave of
4
<PAGE> 6
absence exceed ninety (90) days and his or her re-employment rights not
be guaranteed by either statute or contract, then the Participant's
status as an Eligible Employee will be deemed to terminate on the
ninety-first (91st) day of that leave, and such Participant's purchase
right for the purchase period in which that leave began shall thereupon
terminate. An individual who returns to active employment following such
a leave shall be treated as a new Employee for purposes of the Plan and
must, in order to resume participation in the Plan, re-enroll in the
Plan (by making a timely filing of the prescribed enrollment forms) on
or before the start date of the new purchase period.
G. TRANSFER OF EMPLOYMENT. In the event that a Participant who is an
Eligible Employee of a Foreign Subsidiary is transferred and becomes an Eligible
Employee of the Corporation during a purchase period under the Plan, such
individual shall continue to remain a Participant in the Plan and payroll
deductions shall continue to be collected until the next Purchase Date as if the
Participant had remained an Eligible Employee of the Foreign Subsidiary.
In the event that an employee of the Corporation who is a
participant in the U.S. Plan is transferred and becomes an Eligible Employee of
a Foreign Subsidiary during a purchase period in effect under the U.S. Plan,
such individual shall automatically become a Participant under the Plan for the
duration of the purchase period in effect at that time under the Plan and the
balance in such individual's book account maintained under the U.S. Plan shall
be transferred as a balance to a book account opened for such individual under
the Plan. Such balance, together with all other payroll deductions collected
from such individual by the Foreign Subsidiary for the remainder of the purchase
period under the Plan (as converted into U.S. Dollars), shall be applied on the
next Purchase Date to the purchase of Common Stock under the Plan.
H. CHANGE IN CONTROL. Each outstanding purchase right shall
automatically be exercised, immediately prior to the effective date of any
Change in Control by applying the payroll deductions of each Participant for the
purchase period in which such Change in Control occurs, as converted into U.S.
Dollars on the basis of the exchange rate in effect as determined by the Plan
Administrator at the time of the Corporate Transaction, to the purchase of whole
shares of Common Stock at a purchase price per share equal to eighty-five
percent (85%) of the lower of (i) the Fair Market Value per share of Common
Stock on the start date of the purchase period in which such Change in Control
occurs or (ii) the Fair Market Value per share of Common Stock immediately prior
to the effective date of such Change in Control. However, the applicable
limitation on the number of shares of Common Stock purchasable per Participant
shall continue to apply to any such purchase.
The Corporation shall use its best efforts to provide at least
ten (10)-days prior written notice of the occurrence of any Change in Control,
and Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Change in Control.
I. PRORATION OF PURCHASE RIGHTS. Should the total number of shares
of Common Stock to be purchased pursuant to outstanding purchase rights on any
particular date exceed the number of shares then available for issuance under
the Plan and the U.S. Plan, the
5
<PAGE> 7
Plan Administrator shall make a pro-rata allocation of the available shares on a
uniform and nondiscriminatory basis, and the payroll deductions of each
Participant, to the extent in excess of the aggregate purchase price payable for
the Common Stock pro-rated to such individual, shall be refunded in the currency
in which payroll (from which such deductions were made) was paid to the
Participant by the Foreign Subsidiary.
J. ASSIGNABILITY. The purchase right shall be exercisable only by
the Participant and shall not be assignable or transferable by the Participant.
K. STOCKHOLDER RIGHTS. A Participant shall have no stockholder
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (i) rights to purchase Common
Stock accrued under any other purchase right granted under this Plan and (ii)
similar rights accrued under other employee stock purchase plans (within the
meaning of Code Section 423) of the Corporation or any Corporate Affiliate,
would otherwise permit such Participant to purchase more than Twenty-Five
Thousand U.S. Dollars (U.S.$25,000) worth of stock of the Corporation or any
Corporate Affiliate (determined on the basis of the Fair Market Value per share
on the date or dates such rights are granted) for each calendar year such rights
are at any time outstanding.
B. For purposes of applying such accrual limitations to the purchase
rights granted under the Plan, the following provisions shall be in effect:
(i) The right to acquire Common Stock under each outstanding
purchase right shall accrue on the Purchase Date in effect for the
period on which such right is granted.
(ii) No right to acquire Common Stock under any outstanding
purchase right shall accrue to the extent the Participant has already
accrued in the same calendar year the right to acquire Common Stock
under one (1) or more other purchase rights at a rate equal to
Twenty-Five Thousand U.S. Dollars (U.S.$25,000) worth of Common Stock
(determined on the basis of the Fair Market Value per share on the date
or dates of grant) for each calendar year such rights were at any time
outstanding.
C. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular purchase period, then the payroll
deductions which the Participant made during that purchase period with respect
to such purchase right shall be promptly refunded in the currency in which
payroll (from which such deductions were made) was paid to the Participant by
the Foreign Subsidiary.
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<PAGE> 8
D. In the event there is any conflict between the provisions of this
Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on March 31, 1999 and shall
become effective on the Effective Date, provided no purchase rights granted
under the Plan shall be exercised, and no shares of Common Stock shall be issued
hereunder, until (i) the Plan shall have been approved by the stockholders of
the Corporation and (ii) the Corporation shall have complied with all applicable
requirements of the 1933 Act (including the registration of the shares of Common
Stock issuable under the Plan on a Form S-8 registration statement filed with
the Securities and Exchange Commission), all applicable listing requirements of
any stock exchange (or the Nasdaq National Market, if applicable) on which the
Common Stock is listed for trading and all other applicable requirements
established by law or regulation. In the event such stockholder approval is not
obtained, or such compliance is not effected, within twelve (12) months after
the date on which the Plan is adopted by the Board, the Plan shall terminate and
have no further force or effect, and all sums collected from Participants during
the initial purchase period hereunder shall be refunded.
B. Unless sooner terminated by the Board, the Plan shall terminate
upon the earliest of (i) the last business day in July 2009, (ii) the date on
which all shares available for issuance under the Plan and the U.S. Plan shall
have been sold pursuant to purchase rights exercised under the Plan and the U.S.
Plan or (iii) the date on which all purchase rights are exercised in connection
with a Change in Control. No further purchase rights shall be granted or
exercised, and no further payroll deductions shall be collected, under the Plan
following such termination.
X. AMENDMENT/TERMINATION OF THE PLAN
A. The Board may alter, amend, suspend or terminate the Plan at any
time to become effective immediately following the close of any purchase period.
However, the Plan may be amended or terminated immediately upon Board action, if
and to the extent necessary to assure that the Corporation will not recognize,
for financial reporting purposes, any compensation expense in connection with
the shares of Common Stock offered for purchase under the Plan, should the
financial accounting rules applicable to the Plan at the Effective Time be
subsequently revised so as to require the recognition of compensation expense in
the absence of such amendment or termination.
B. In no event may the Board effect any of the following amendments
or revisions to the Plan without the approval of the Corporation's stockholders:
(i) increase the number of shares of Common Stock issuable under the Plan or the
maximum number of shares purchasable per Participant on any one Purchase Date,
except for permissible adjustments in the event of certain changes in the
Corporation's capitalization, (ii) alter the purchase price formula so as to
reduce the purchase price payable for the shares of Common Stock purchasable
under the Plan or (iii) modify eligibility requirements for participation in the
Plan.
7
<PAGE> 9
XI. GENERAL PROVISIONS
A. Nothing in the Plan shall confer upon the Participant any right
to continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.
B. All costs and expenses incurred in the administration of the Plan
shall be paid by the Corporation; however, each Plan Participant shall bear all
costs and expenses incurred by such individual in the sale or other disposition
of any shares purchased under the Plan.
C. Except to the extent otherwise provided in any addendum to the
Plan, the provisions of the Plan shall be governed by the laws of the State of
Georgia without resort to that State's conflict-of-laws rules.
D. A Foreign Subsidiary or the Plan Administrator, as the case may
be, shall have the right to deduct from any payment to be made under this Plan,
or to otherwise require, prior to the issuance or delivery of any shares of
Common Stock or the payment of any cash, payment by each Participant of any tax
required by applicable law to be withheld.
E. Additional provisions for individual Foreign Subsidiaries may be
incorporated in one or more Addenda to the Plan. Such Addenda shall have full
force and effect with respect to the Foreign Subsidiaries to which they apply.
In the event of a conflict between the provisions of such an Addendum and one or
more other provisions of the Plan, the provisions of the Addendum shall be
controlling.
8
<PAGE> 10
SCHEDULE A
CORPORATIONS PARTICIPATING IN
1999 INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE DATE
ISS GROUP UK LTD.
INTERNET SECURITY SYSTEMS, KK
INTERNET SECURITY SYSTEMS, NV
INTERNET SECURITY SYSTEMS, SARL
<PAGE> 11
APPENDIX
The following definitions shall be in effect under the Plan:
A. BASE SALARY shall mean the (i) regular base salary paid to a
Participant by one or more Foreign Subsidiaries during such individual's period
of participation in one or more Purchase Periods under the Plan plus (ii) any
pre-tax contributions made by the Participant to any Code Section 401(k) salary
deferral plan or any Code Section 125 cafeteria benefit program now or hereafter
established by the Corporation or any Corporate Affiliate. However, Base Salary
shall not include overtime payments, bonuses, commissions, profit-sharing
distributions and other incentive-type payments or any contributions (other than
Code Section 401(k) or Code Section 125 contributions) made on the Participant's
behalf by the Corporation or any Corporate Affiliate to any deferred
compensation plan or welfare benefit program now or hereafter established.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean any of the following transactions
effecting a change in ownership or control of the Corporation:
(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,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation, or
(iii) 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.
D. CODE shall mean the United States Internal Revenue Code of 1986,
as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE AFFILIATE shall mean any parent or subsidiary
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.
A-1
<PAGE> 12
G. CORPORATION shall mean ISS Group, Inc., a Delaware corporation,
and any corporate successor to all or substantially all of the assets or voting
stock of ISS Group, Inc. which shall by appropriate action adopt the Plan.
H. EFFECTIVE DATE shall mean July 1, 1999. Any Foreign Subsidiary
which becomes a Participating Corporation after such Effective Date shall
designate a subsequent Effective Date with respect to its employee-Participants.
I. ELIGIBLE EMPLOYEE shall mean any person who is employed by a
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section
3401(a).
J. 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 such 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.
K. FOREIGN SUBSIDIARY shall mean any non-U.S. Corporate Affiliate
or Affiliates as may be authorized from time to time by the Board to extend the
benefits of the Plan to their Eligible Employees. The Foreign Subsidiaries in
the Plan as of the Effective Date are listed in attached Schedule A.
L. 1933 ACT shall mean the United States Securities Act of 1933, as
amended.
M. 1934 ACT shall mean the United States Securities Exchange Act of
1934, as amended.
N. PARTICIPANT shall mean any Eligible Employee of a Foreign
Corporation who is actively participating in the Plan.
A-2
<PAGE> 13
O. PLAN shall mean the Corporation's 1999 International Employee
Stock Purchase Plan, as set forth in this document.
P. PLAN ADMINISTRATOR shall mean the committee of two (2) or more
Board members appointed by the Board to administer the Plan.
Q. PURCHASE DATE shall mean the last business day of each purchase
period. The initial Purchase Date shall be January 31, 2000.
R. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.
A-3
<PAGE> 1
EXHIBIT 99.13
FORM OF STOCK PURCHASE AGREEMENT
<PAGE> 2
ISS GROUP, INC.
INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN
STOCK PURCHASE AGREEMENT
I hereby elect to participate in the International Employee Stock
Purchase Plan (the "IESPP") for the purchase period specified below, and I
hereby subscribe to purchase shares of Common Stock of ISS Group, Inc. (the
"Corporation") in accordance with the provisions of this Agreement and the
IESPP. I hereby authorize payroll deductions from each of my paychecks following
my entry into the IESPP in the 1% multiple of my base salary (not to exceed a
maximum of 10%) specified in my attached Enrollment Form.
Purchase periods under the IESPP will run from the first business
day in February to the last business day in July each year and from the first
business day in August to the last business day in January of the following
year. The initial purchase period under the IESPP will begin on July 1, 1999 and
end on January 31, 2000. My participation will automatically remain in effect
from one purchase period to the next in accordance with my payroll deduction
authorization, unless I withdraw from the IESPP or change the rate of my payroll
deduction or unless my employment status changes. I may reduce the rate of my
payroll deductions on one occasion per purchase period, and I may increase my
rate of payroll deductions to become effective at the beginning of any
subsequent purchase period.
My payroll deductions will be converted into U.S. Dollars on the
last U.S. business day of each purchase period. My payroll deductions (as
converted into U.S. Dollars) will be accumulated for the purchase of shares of
the Corporation's Common Stock on the last U.S. business day of each purchase
period. The purchase price per share will be equal to 85% of the lower of (i)
the U.S. fair market value per share of Common Stock on the start date of the
purchase period or (ii) the U.S. fair market value per share on the purchase
date. I will also be subject to IESPP restrictions (i) limiting the maximum
number of shares which I may purchase per purchase period and (ii) prohibiting
me from purchasing more than $25,000 worth of Common Stock for each calendar
year my purchase right remains outstanding.
I may withdraw from the IESPP at any time prior to the last day
of the purchase period and the Corporation will refund all my payroll deductions
for that period. However, I may not rejoin that particular purchase period at
any later date. Upon the termination of my employment for any reason, including
death or disability, or my loss of eligible employee status, my participation in
the IESPP will immediately cease, and all my payroll deductions for the purchase
period in which my employment terminates or my loss of eligibility occurs will
immediately be refunded.
If I take an unpaid leave of absence, my payroll deductions will
immediately cease, and any payroll deductions for the purchase period in which
my leave begins will be refunded. If my re-employment is guaranteed by either
law or contract, or if I return to active service within ninety (90) days, then
upon my return my payroll deductions will automatically resume at the rate in
effect when my leave began.
The Corporation will issue a stock certificate for the shares
purchased on my behalf after the end of each purchase period. The certificate
will be issued in street name and will be deposited directly in my
Corporation-designated brokerage account. I will notify the Corporation of any
disposition of shares purchased under the IESPP, and I will satisfy all
applicable income and employment tax withholding requirements at the time of
such disposition.
The Corporation has the right, exercisable in its sole
discretion, to amend or terminate all outstanding purchase rights under the
IESPP at any time, with such amendment or termination to become effective
immediately following the end of any purchase period. However, such purchase
rights may be amended or terminated with an immediate effective date to the
extent necessary to avoid the Corporation's recognition of compensation expense
for financial reporting purposes, should the accounting principles applicable to
the IESPP change. Upon any such termination, I will cease to have any further
rights to purchase shares of Common Stock under this Agreement.
I acknowledge that I have received and may continue to receive
the opportunity to purchase stock under the IESPP. I understand that the grant
of a purchase right in one year or at one time does not in any way obligate the
Corporation to make a grant or award in any future year or in any given amount.
I acknowledge and understand that the IESPP is wholly discretionary in nature
and is not to be considered part of my normal or expected compensation subject
to severance, resignation, redundancy or similar pay.
I hereby authorize and direct my employer Corporation to disclose
to ISS Group, Inc. or any of its subsidiaries such information regarding my
employment, the nature and amount of my compensation and the fact and conditions
of my participation in the IESPP as my employer Corporation deems necessary to
facilitate the administration of such Plan.
I have read this Agreement and hereby agree to be bound by the
terms of both this Agreement and the IESPP. The effectiveness of this Agreement
is dependent upon my eligibility to participate in the IESPP.
Date: ________________, 1999 Signature of Employee _____________________
Printed Name: _____________________________
Enrollment Effective
Purchase Period Beginning:
[ ] July 1, 1999
[ ] February 1, 200__
[ ] August 1, 200__
<PAGE> 1
EXHIBIT 99.14
FORM OF ENROLLMENT/CHANGE FORM
<PAGE> 2
ISS GROUP, INC.
INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN ("IESPP")
ENROLLMENT/CHANGE FORM
<TABLE>
<S> <C> <C>
SECTION 1: Action Complete Sections:
------------------ ------------------
ACTIONS [ ] New Enrollment 2, 3, 7 and sign attached Stock
[ ] Payroll Deduction Change Purchase Agreement
[ ] Terminate Payroll Deductions 2, 4, 7
[ ] Leave of Absence 2, 5, 7
2, 6, 7
________________________________________________________________________________
SECTION 2: Name________________________________________________________________
PERSONNEL Last First MI Dept.
DATA
Home Address________________________________________________________
Street
________________________________________________________
City State Zip Code
Social Security #__ ___ ___ - ___ ___ - ___ ___ ___ ___
_______________________________________________________________________________________________________
SECTION 3:
Effective with the Purchase
Period Beginning: Payroll Deduction Amount: __% of base
salary(*)
NEW
ENROLLMENT [ ] February 1, 200_
(*) Must be a multiple of 1% up to a
maximum of 10% of base salary
[ ] August 1, 200_
[ ] Initial Purchase Period - July 1, 1999
_______________________________________________________________________________________________________
SECTION 4: Effective with the I authorize the following new
Pay Period Beginning:____________________________ level of payroll deduction:
PAYROLL Month, Day and Year ______% of base salary
DEDUCTION (*) Must be a multiple of 1% up
CHANGE to a maximum of 10% of base salary
NOTE: You may reduce your rate of payroll deductions once per
6-month purchase period to become effective as soon as
possible following the filing of the change form. You may
also increase your rate of payroll deductions to become
effective as of the start date of the next 6-month
purchase period.
_______________________________________________________________________________________________________
SECTION 5: Effective with the Your election to terminate your payroll
Pay Period Beginning:_______________________ deductions for the balance of the
Month, Day and Year purchase period cannot be changed,
TERMINATE and you may not rejoin the purchase
PAYROLL period at a later date. You will not be
DEDUCTIONS able to resume participation in the IESPP
until the start of the next purchase period.
Upon my voluntary termination of payroll deductions, all payroll
deductions collected during the current purchase period will be
refunded.
NOTE: If your employment terminates for any reason or your
eligibility status changes (<20 hrs/wk or <5 months/yr),
you will immediately cease to participate in the IESPP, and
your IESPP payroll deductions collected in that purchase
period will automatically be refunded to you.
_______________________________________________________________________________________________________
SECTION 6: In connection with my leave of absence, I elect the following
action with respect to my IESPP payroll deductions to date:
LEAVE OF
ABSENCE [ ] Purchase shares of ISS Group, Inc. on next scheduled purchase date
OR
[ ] Refund IESPP payroll deductions collected
NOTE: If you take an unpaid leave of absence, your payroll
deductions will immediately cease. If you return to active
status within 90 days after the start of your leave, your
payroll deductions will at that time automatically resume
at the rate in effect for you when your leave began.
_______________________________________________________________________________________________________
SECTION 7:
AUTHORIZATION
_______________________________________________ _____________________________________
Date Signature of Employee
</TABLE>
<PAGE> 1
EXHIBIT 99.15
NETREX, INC. 1998 STOCK PLAN
<PAGE> 2
NETREX, INC.
1998 STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business options granted
under the Plan may be Incentive Stock Options or Nonstatutory Stock Options as
determined by the Administrator at the time of grant. Stock Purchase Rights may
also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as
shall be administering the Plan in accordance with Section 4 hereof.
(b) "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any other country or jurisdiction where Options or Stock Purchase Rights are
granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee of Directors appointed by the
Board in accordance with Section 4 hereof.
(f) "COMMON STOCK" means the Common Stock of the Company.
(g) "COMPANY" means Netrex, Inc., a Michigan corporation.
(h) "CONSULTANT" means any person who is engaged by the Company or
any Parent or Subsidiary to render consulting or advisory services to such
entity.
(i) "DIRECTOR" means a member of the Board of Directors of the
Company.
(j) "DISABILITY" means total and permanent disability as defined
in Section 22(c)(3) of the Code.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed
<PAGE> 3
by statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, on the 181st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option. Neither service as a Director nor payment of a director's fee by
the Company shall be sufficient to constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the Nasdaq
National Market or The Nasdaq Small Cap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(q) "OPTION" means a stock option granted pursuant to the Plan.
(r) "OPTION AGREEMENT" means a written or electronic agreement
between the Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The option Agreement is subject to the terms and
conditions of the Plan.
(s) "OPTION EXCHANGE PROGRAM" means a program whereby outstanding
Options are exchanged for Options with a lower exercise price.
(t) "OPTIONED STOCK" means the Common Stock subject to an Option
or a Stock Purchase Right.
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<PAGE> 4
(u) "OPTIONEE" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(v) "PARENT" means a "parent corporation" whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(w) "PLAN" means this 1999 Stock Plan.
(x) "RESTRICTED STOCK" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(y) "SECTION 16(b)" means Section 16(b) of the Securities Exchange
Act of 1934, as amended.
(z) "SERVICE PROVIDER" means an Employee, Director or Consultant.
(aa) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(bb) "STOCK PURCHASE RIGHT" means a right to purchase Common Stock
pursuant to Section 11 below.
(cc) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of Shares which may be subject to
option and sold under the Plan is 600,000 Shares. The Shares may be authorized
but unissued or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated). However, Shares that have actually been issued under the Plan,
upon exercise of either an Option or Stock Purchase Right, shall not be returned
to the Plan and shall not become available for future distribution under the
Plan, except that if Shares of Restricted Stock are repurchased by the Company
at their original purchase price, such Shares shall become available for future
grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) ADMINISTRATOR. The Plan shall be administered by the Board or
a Committee appointed by the Board, which Committee shall be constituted to
comply with Applicable Law.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and
3
<PAGE> 5
subject to the approval of any relevant authorities, the Administrator shall
have the authority in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and
Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by each
such award granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, of any Option or
Stock Purchase Right granted hereunder. Such terms and conditions include, but
are not limited to, the exercise price, the time or times when Options or Stock
Purchase Rights may be exercised (which may be based on performance criteria),
any vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Option or Stock Purchase Right or the
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vi) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(e) instead of Common Stock;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted;
(viii) to initiate an Option Exchange Program;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by Optionees
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable; and
(xi) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees.
4
<PAGE> 6
5. ELIGIBILITY.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
(b) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However.
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options, for purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon any Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall it interfere in
any way with his or her right or the Company's right to terminate such
relationship at any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon its adoption by
the Board. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 14 of the Plan.
7. TERM OF OPTION. The term of each Option shall be stated in the
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. In the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted owns stock
representing more dm ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant or such shorter term as may be provided
in the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued upon
exercise of an option, shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock option
(A) granted to an Employee who at the time of grant
of such option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the exercise price shall be no less than 110% of the Fair Market Value per Share
on the date of grant.
(B) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
5
<PAGE> 7
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a Service Provider who, at the time of
grant of such Option, owns stock representing more than ten percent (100%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the exercise price shall be no less than 110% of the Fair Market
Value per Share on the date of grant.
(B) granted to any other Service Provider, the per
Share exercise price shall be no less than 85% of the Fair Market Value per
Share an the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price other than as required above pursuant to a
merger or other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a fair Market Value an
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exerciser, (5) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan, or (6) any combination of the foregoing methods of payment. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable according to the terms hereof, determined
by the Administrator and set forth in the Option Agreement. Except in the case
of Options granted to Officers, Directors and Consultants, Options shall become
exercisable at a race of no less than 20% per year over five (5) years from the
date the Options are granted. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. The
Company
6
<PAGE> 8
shall issue (or cause to be issued) such Shares promptly after the Option is
exercised. No adjustment shall be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 12 of the Plan.
Exercise of an Option in any matter shall result in a decrease
in the number of Shares thereafter available, both for purposes of the Plan and
for sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If an
Optionee ceases be a Service Provider, such Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement (of at
least thirty (30) days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option
as set forth in the Option Agreement). In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for three (3) months
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination
the Optionee does not exercise his or her Option within the time specified by
the Administrator, the Option shall terminate and the Shares covered by such
Option shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
(of at least six (6) months) to the extent the Option is vested on the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). In the absence of a specified time
in the Option Agreement, the Option shall remain exercisable for twelve (12)
months following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate and the Shares covered by such Option shall
revert to the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (of at least six (6) months) to the extent that the
Option is vested on the date of death (but in no event later than the expiration
of the term of such Option as set forth in the Option Agreement) by the
Optionee's estate or by a person who acquires the right to exercise the Option
by bequest or inheritance. In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, at the time of death, the Optionee is not vested
as to the entire Option, the Shims covered by the unvested portion of the Option
shall immediately revert to the Plan. If the Option is not so exercised within
the time specified herein the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(e) BUYOUT PROVISIONS. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and
7
<PAGE> 9
conditions as the Administrator shall establish and communicate to the Optionee
at the time that such offer is made.
10. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. The
Options and Stock Purchase Rights may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised, during the lifetime of
the Optionee, only by the Optionee.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically of the terms, conditions and restrictions
related to the offer, including the number of Shares that such person shall be
entitled to purchase, the price to be paid, and the time within which such
person must accept such offer. The offer shall be accepted by execution of a
Restricted Stock purchase agreement in the form determined by the Administrator.
(b) REPURCHASE OPTION. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase Option shall lapse at such rate as the
Administrator may determine. Except with respect to Shares purchased by
Officers, Directors and Consultants, the repurchase option shall in no case
lapse at a rate of less than 20% per year over five (5) years from the date of
purchase.
(c) OTHER PROVISIONS. The Restricted Stock purchase agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by e Administrator in its sole discretion.
(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is
exercised, this purchaser shall have rights equivalent to those of a shareholder
and shall be a shareholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 12 of
the Plan.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorizer for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock
8
<PAGE> 10
covered by each such outstanding Option or Stock Purchase Right, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company. The conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option or Stock
Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option or Stock Purchase Right until
fifteen (15) days prior to such transaction as to all of the Optioned Stock
covered thereby, including Shares as to which the Option or Stock Purchase Right
would not otherwise be exercisable. In addition, the Administrator may provide
that any Company repurchase option applicable to any Shares purchased upon
exercise of an Option or Stock Purchase Right shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option or Stock Purchase Right will terminate immediately prior to the
consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Fight shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock Purchase
Right shall terminate upon the expiration of such period. For the purposes of
this paragraph, the Option or Stock Purchase Right shall be considered assumed
if, following the merger or sale of assets the option or right confers the
right to purchase or receive, for each Share of Optioned Stock subject to the
Option or Stock Purchase Right immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for each
Share held on the effective date of the transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the
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<PAGE> 11
exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
13. TIME OF GRANTING OPTIONS AND STOCK PURCHASE RIGHTS. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator. Notice
of the determination shall be given to each Service Provider to whom an Option
or Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) SHAREHOLDER APPROVAL. The Board shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
15. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise of
an Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if in the opinion of counsel for the Company, such a
representation is required.
16. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
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<PAGE> 12
17. RESERVATION OF SHARES. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under Applicable Laws.
19. INFORMATION TO OPTIONEES AND PURCHASERS. The Company shall provide
to each Optionee and to each individual who acquires Shares pursuant to the
Plan, not less frequently than annually during the period such Optionee or
purchaser has one or more Options or Stock Purchase Rights outstanding, and, in
the case of an individual who acquires Shares pursuant to the Plan, during the
period such individual owns such Shares, copies of annual financial statements.
The Company shall not be required to provide such statements to key employees
whose duties in correction with the Company assure their access to equivalent
information.
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<PAGE> 1
EXHIBIT 99.16
FORM OF STOCK OPTION AGREEMENT (STANDARD FORM)
<PAGE> 2
EXHIBIT 99.16
NETREX, INC.
1998 STOCK PLAN
STOCK OPTION AGREEMENT
STANDARD FORM
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
The undersigned Optionee has been granted an Option to Purchase Common
Stock of the Company, subject to the terms and Conditions of the Plan and this
Option Agreement, as follows:
Grant Number ________________________________
Date of Grant ________________________________
Vesting Commencement Date ________________________________
Exercise Price per Share ________________________________
Total Number of Share Granted ________________________________
Total Exercise Price ________________________________
Type of Option: ______ Incentive Stock Option
______ Nonstatutory Stock Option
Term/Expiration Date: ________________________________
Vesting Schedule: ________________________________
This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:
25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 1/16 of the Shares subject to the Option
shall vest each quarter thereafter, subject to Optionee's continuing to be a
Service Provider on such dates.
<PAGE> 3
Termination Period:
This option shall be exercisable for thirty (30) days after Optionee
ceases to be a Service Provider. Upon Optionee's death or Disability, this
Option may be exercised for one year after Optionee ceases to be a Service
Provider. In no event may Optionee exercise this Option after the
Term/Expiration Date as provided above.
II. AGREEMENT
1. GRANT OF OPTION. The Plan Administrator of the Company hereby
grants to the Optionee named in the Notice of Grant (the "Optionee"), an option
(the "Option") to purchase the number of Shares set forth in the Notice of
Grant, at the exercise price per Share set forth in the Notice of Grant (the
"Exercise Price"), and subject to thc terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 14(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock
Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option
as defined in Section 422 of the Code. Nevertheless, to the extent that it
exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated
as a Nonstatutory Stock Option ("NSO").
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option shall be exercisable
during its term in accordance with the Vesting Schedule set out in the Notice of
Grant and with the applicable provisions of the Plan and this Option Agreement.
(b) METHOD OF EXERCISE. This Option shall be exercisable by
delivery of an exercise notice in the form attached as Exhibit A (the "Exercise
Notice") which shall state the election to exercise the Option, the number of
Shares with respect to which the Option is being exercised, and such other
representations and agreements as may be required by the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by the aggregate
Exercise Price.
No Shares shall be issued pursuant to the exercise of in Option
unless such issuance and such exercise complies with Applicable laws. Assuming
such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date an which the Option is exercised with
respect to such Shares.
3. OPTIONEE'S REPRESENTATION. In the event the Shares have not been
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if required by the Company, concurrently with
the exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as Exhibit
B.
2
<PAGE> 4
4. LOCK-UP PERIOD. Optionee hereby agrees that, if so requested by
the Company or any representative of the underwriters (the "Managing
Underwriter") in connection with any registration of the offering of any
securities of the Company under the Securities Act, Optionee shall not sell or
otherwise transfer any Shares or other securities of the Company during the
180-day period (or such other period as may be requested in writing by the
Managing Underwriter and agreed to in writing by the Company) (the "Market
Standoff Period") following the effective date of a registration, statement of
the Company filed under the Securities Act. Such restriction shall apply only to
the first registration statement of the Company to become effective under the
Securities Act that includes securities to be sold on behalf of the Company to
the public in an underwritten public offering under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such Market Standoff Period.
5. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall
be by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal
cashless exercise program adopted by the Company in connection with the Plan; or
(c) surrender of other Shares, which, (i) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (ii) have a Fair Market
Value on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares.
6. RESTRICTIONS ON EXERCISE. This Option may not be exercised until
such time as the Plan has been approved by the shareholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.
7. NON-TRANSFERABILITY OF OPTION. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by
Optionee. The terms of the Plan and this Option Agreement shall be binding upon
the; executors, administrators, heirs, successors and assigns of the Optionee.
8. TERM OF OPTION. This Option may be exercised only within the
term set out in the Notice of Grant,, and may be exercised during such term only
in accordance with the Plan and the terms of this Option.
9. TAX CONSEQUENCES. Set forth below is a brief summary as of the
date of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD
CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
3
<PAGE> 5
(a) EXERCISE OF ISO. If this Option qualifies as an ISO,
there will be no regular federal income tax liability upon the exercise of the
Option, although the excess, if any, of the Fair Market Value of the Shares an
the date of exercise over the Exercise Price will be treated as an adjustment to
the alternative minimum tax for federal tax purposes and may subject the
Optionee to the alternative minimum tax in the year of exercise.
(b) EXERCISE OF NONSTATUTORY STOCK OPTION. There may be a
regular federal income tax liability upon the exercise of a Nonstatutory Stock
Option. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price. If
Optionee is an Employee or a former Employee, the Company will be required to
withhold from Optionee's compensation or collect from Optionee and pay to the
applicable taxing authorities amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
(c) DISPOSITION OF SHARES. In the case of an NSO, if Shares
are: held for at least one year, any gain realized on disposition of the Shares
will be treated as long-term capital gain for federal income tax purposes. In
the case of an ISO, if Shares transferred pursuant to the Option are held for at
least one year after exercise and of at least two years after the Date of Grant,
any gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal income tax purposes. If Shares purchased under an ISO
are disposed of within one year after exercise or two years after the Date of
Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price and the lesser of (1) the Fair Market Value of the
Shares an the date of exercise, or (2) the sale price of the Shares. Any
additional gain will be taxed as capital gain, short-term or long-term depending
on the period that the ISO Shares were held.
(d) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If
the Option granted to Optionee herein is in ISO, and if Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to the ISO on or
before the later of (1) the date two years after the Date of Grant, or (2) the
date one year after the date of exercise, the Optionee shall immediately notify
the Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
10. ENTIRE AGREEMENT; GOVERNING LAW; VENUE; PERSONAL JURISDICTION.
(a) ENTIRE AGREEMENT. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee.
(b) GOVERNING LAW. This agreement is governed by the
internal substantive laws but not the choice of law rules of Michigan.
4
<PAGE> 6
(c) CONSENT TO VENUE; PERSONAL JURISDICTION. Optionee
consents to the personal jurisdiction of the Michigan courts. Optionee agrees
that any and all disputes arising out of this Agreement shall be heard in the
Oakland County Circuit Court or the Southfield District Court in the state of
Michigan.
11. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND
AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS
EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that
he or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option. Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.
OPTIONEE NETREX, INC.
__________________________________ _____________________________________
Signature By
__________________________________ _____________________________________
Print Name Title
__________________________________
__________________________________
Residence Address
5
<PAGE> 7
EXHIBIT A
1998 STOCK PLAN
EXERCISE NOTICE
NETREX, INC.
3000 TOWN CENTER, SUITE 1100
SOUTHFIELD, MI 48075
Attention: Secretary
1. EXERCISE OF OPTION. Effective as of today, 19, , the undersigned
("Optionee") hereby elects to exercise Optionee's option to purchase shares of
the Common Stock (the "Shares") of Netrex, Inc. (the "Company") under and
pursuant to the 1999 Stock Plan (the "Plan") and the Stock Option Agreement
dated _____________, 19____ (the "Option Agreement").
2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company
the full purchase price of the Shares, as set forth in the Option Agreement.
3. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. RIGHTS AS SHAREHOLDER. Until the issuance of the Shares (as
evidenced by the appropriate entry on the books of the Company or of a any
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares shall be issued to
the Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 12 of the Plan.
5. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares held by
Optionee or any transferee (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section (the "Right of First Refusal").
(a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares
shall deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Shares, (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the bona fide cash price or other consideration for which the Holder
proposes to transfer the Shares (the "Offered Price"), and the Holder shall
offer the Shares at the offered Price to the Company or its assignee(s).
6
<PAGE> 8
(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (c) below.
(c) PURCHASE PRICE. The purchase price ("Purchase Price")
for the Shares purchased by the Company or its assignee(s) under this Section
shall be the Offered Price. If the Offered Price includes consideration other
than cash, the rash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(d) PAYMENT. Payment of the Purchase Price shall be made, at
the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(e) HOLDER'S RIGHT TO TRANSFER. If all of the Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Shares to that Proposed
Transferee at the Offered Price or at a higher price, provided that such sale or
other transfer is consummated within 120 days after the date of the Notice, that
any such sale or other transfer is effected in accordance with any applicable
securities laws and that the Proposed Transferee agrees in writing that the
provisions of this Section shall continue to apply to the Shares in the hands of
such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be
given to the Company, and the Company and/or its assignees shall again be
offered the Fight of First Refusal before any Shares held by the Holder may be
sold or otherwise transferred.
(f) EXCEPTIONS FOR CERTAIN FAMILY TRANSFERS. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to the Optionee's immediate family or a trust for the benefit of
the Optionee's immediate family shall be exempt from the provisions of this
Section. "Immediate Family" as used herein shall mean spouse, lineal descendant
or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so transferred subject to
the provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
(g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of
First Refusal shall terminate as to any Shares upon the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended.
6. TAX CONSULTATION. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in
7
<PAGE> 9
connection with the purchase or disposition of the Shares and that Optionee is
not relying on the Company for any tax advice.
7. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. Optionee understands and agrees that the
Company shall cause the legends set forth below or legends substantially
equivalent thereto, to be placed upon any certificate(s) evidencing ownership of
The Sharer, together with any other legends That may be required by the Company
or by state or federal securities laws.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY
COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL
HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE
EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF
THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL
OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF
FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) STOP-TRANSFER NOTICES. Optionee agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required
(i) to transfer an its books any Shares that have been sold or otherwise
transferred in violation of any, of the provisions of this Agreement or (ii) to
treat as owner of such Shares or to accord the right to vote or pay dividends to
any purchaser or other transferee to whom such Shares shall have been so
transferred.
8. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
8
<PAGE> 10
9. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
10. GOVERNING LAW; SEVERABILITY. This Agreement is governed by the
internal substantive laws but not the choice of law rules, of Michigan.
11. CONSENT TO VENUE; PERSONAL JURISDICTION. Optionee consents to
the personal jurisdiction of the Michigan courts. Optionee at any and all
disputes arising out of this Agreement shall be heard in the Oakland County
Circuit Court or the Southfield District Court in the state of Michigan.
12. ENTIRE AGREEMENT. The Plan and Option Agreement am incorporated
herein by reference. This Agreement, the Plan, the Option Agreement and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee.
Submitted by: Accepted by:
OPTIONEE NETREX, INC.
__________________________________ _____________________________________
Signature By
__________________________________ _____________________________________
Print Name Title
Address: Address:
3000 Town Center, Suite 1100
__________________________________ Southfield, MI 48075
__________________________________
_____________________________________
Date Received
9
<PAGE> 11
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: NETREX, INC.
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In correction with the purchase of the above-listed Securities, the
undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities, Optionee
is acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year of any other fixed
period in the future. Optionee further understands that The Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company and any other legend required
under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifier under Rule 701 at the time of the grant of the Option w the Optionee,
the exercise will be exempt from registration under the Securities Act. In the
event the Company becomes subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934,
10
<PAGE> 12
ninety (90) days thereafter (or such longer period as any market stand-off
agreement may require) the Securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including: (1) the resale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934); and, in the case of
an affiliate, (2) the availability of certain public information about the three
month period not exceeding the Company, (3) the amount of Securities being sold
owing any limitations specified in Rule 144(e), and (4) the timely filing of a
Form 144, if applicable.
In the event that The Company does not qualify under Rule 701 at the
time of grant of the option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than one year after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less then two years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(d) Optionee further understands that in the event all of the
applicable requirements Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
Signature of Optionee:
___________________________________
Date: _____________________, 19____
11
<PAGE> 1
EXHIBIT 99.17
FORM OF STOCK OPTION AGREEMENT (STOCK REPURCHASE RIGHT FORM)
<PAGE> 2
EXHIBIT 99.17
NETREX, INC.
1998 STOCK PLAN
STOCK OPTION AGREEMENT
STOCK REPURCHASE RIGHT FORM
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
The undersigned Optionee has been granted an Option to Purchase Common
Stock of the Company, subject to the terms and Conditions of the Plan and this
Option Agreement, as follows:
Grant Number ________________________________
Date of Grant ________________________________
Vesting Commencement Date ________________________________
Exercise Price per Share ________________________________
Total Number of Share Granted ________________________________
Total Exercise Price ________________________________
Type of Option: ______ Incentive Stock Option
______ Nonstatutory Stock Option
Term/Expiration Date: ________________________________
Vesting Schedule: ________________________________
This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:
25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 1/16 of the Shares subject to the Option
shall vest each quarter thereafter, subject to Optionee's continuing to be a
Service Provider on such dates.
<PAGE> 3
Termination Period:
This Option shall be exercisable for thirty (30) days after Optionee
ceases to be a Service Provider. Upon Optionee's death or Disability, this
Option may be exercised for one year after Optionee ceases to be a Service
Provider. In no event may Optionee exercise this Option after the Term
Expiration Date as provided above.
II. AGREEMENT
1. GRANT OF OPTION. The Plan Administrator of the Company hereby
grants to the Optionee named in the Notice of Grant (the "Optionee"), an option
(the "Option") to purchase the number of Shares set forth in the Notice of
Grant, at the exercise price per Share act forth in the Notice of Grant (the
"Exercise Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 14(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code.
Nevertheless, to the extent that it exceeds the $100,000 rule of Code
Section 422(d), this Option shall be treated as a Nonstatutory Stock Option
("NSO").
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option shall be exercisable
during its term in accordance with the Vesting Schedule set out in the Notice of
Grant and with the applicable provisions of the Plan and this Option Agreement
(b) METHOD OF EXERCISE. This Option shall be exercisable by
delivery of an exercise notice in the form attached as Exhibit A (the "Exercise
Notice") which shall state the election to exercise the Option, the number of
Shares with respect to which the Option is being exercised, and such other
representations and agreements as may be required by the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by the aggregate
exercise Price.
No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise complies with Applicable laws. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date an which the Option is exercised with respect to
such Shares.
3. OPTIONEE'S REPRESENTATIONS, In the event the Shares have not
been registered under the Securities Act of 1933, as amended, at the time this
Option is exercised, the Optionee shall, if required by the Company,
concurrently with the exercise of all or any portion of this Option, deliver to
the Company his or her Investment Representation Statement in the form attached
hereto as Exhibit B.
2
<PAGE> 4
4. LOCK-UP PERIOD. Optionee hereby agrees that, if so requested by
the Company or any representative of the underwriters (the "Managing
Underwriter") in connection with any registration of the offering of any
securities of the Company under the Securities Act, Optionee shall not sell or
otherwise transfer any Shares or other securities of the Company during the
180-day period (or such other period as may be requested in writing by the
Managing Underwriter and agreed to in writing by the Company) (the "Market
Stand-off Period") following the effective date of a registration statement of
the Company filed under the Securities Act. Such restriction shall apply only
to the first registration statement of the Company to become effective under the
Securities Act that includes securities to be sold on behalf of the Company to
the public in an underwritten public offering under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such Market Standoff Period.
5. S. METHOD OF PAYMENT. Payment of the aggregate Exercise Price
shall be by any of the following, or a combination thereof, at the election of
the Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal
cashless exercise program adopted by the Company in connection with the Plan, or
(c) (c) surrender of other Shares which, (i) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (ii) have a Fair Market
Value on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares.
6. RESTRICTIONS ON EXERCISE. This Option may not be exercised until
such time as the Plan has been approved by the shareholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.
7. NON-TRANSFERABILITY OF OPTION. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee or by
Optionee. The terms of the Plan and this Option Agreement shall be binding upon
the executors, administrators, heirs, successors and assigns of the Optionee.
8. TERM OF OPTION. This Option may be exercised only within the
term set out in the Notice of Grant, and may be exercised during such term only
in accordance with the Plan and the terms of this Option.
9. TAX CONSEQUENCES. Set forth below is a brief summary as of the
date of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD
CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
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<PAGE> 5
(a) EXERCISE OF ISO. If this Option qualifies as an ISO,
there will be no regular federal income m liability upon the exercise of the
Option, although the excess. if any, of the Fair Market Value of the Shares on
the date of exercise over the Exercise Price will be treated as an adjustment to
the alternative minimum tax for federal tax purposes and may subject the
Optionee to the alternative minimum tax in the year of exercise.
(b) EXERCISE OF NONSTATUTORY STOCK OPTION. There may be a
regular federal income tax liability upon the exercise of a Nonstatutory Stock
Option. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price. If
Optionee is an Employee or a former Employee, the Company will be required to
withhold from Optionee's compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise,
(c) DISPOSITION OF SHARES. In the case of an NSO, if Shares
are held for at least one year, any gain realized o[i disposition of the Shares
will be treated as long-term capital gain for federal income tax purposes. In
the case of an ISO, if Shares transferred pursuant to the Option are held for at
least one year after exercise and of at least two years after the Date of Grant,
any gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal income tax purposes. If Shares purchased under an ISO
are disposed of within one year after exercise or two years after the Date of
Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price and the lesser of (1) the Fair Market Value of the
Shares on the date of exercise, or (2) the sale price of the Shares. Any
additional gain will be taxed as capital gain, short-term or long-term depending
an the period that the ISO Shares were held.
(d) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If
the Option granted to Optionee herein is an ISO, and if Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to the ISO on or
before the later of (1) the date two years after the Date of Grant, or (2) the
date one year after the date of exercise, the Optionee shall immediately notify
the Company in Writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company an the compensation income
recognized by the Optionee.
10. ENTIRE AGREEMENT; GOVERNING LAW; VENUE; PERSONAL JURISDICTION.
(a) ENTIRE AGREEMENT. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee.
(b) GOVERNING LAW. This agreement is governed by the
internal substantive laws but not the choice of law rules of Michigan.
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<PAGE> 6
(c) CONSENT TO VENUE; PERSONAL JURISDICTION. Optionee
consents to the personal jurisdiction of the Michigan courts. Optionee agrees
that any and all disputes arising out of this Agreement shall be heard in the
Oakland County Circuit Court or the Southfield District Court in the state of
Michigan.
11. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND
AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS
EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that
he or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option. Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.
OPTIONEE NETREX, INC.
__________________________________ _____________________________________
Signature By
__________________________________ _____________________________________
Print Name Title
__________________________________
__________________________________
Residence Address
5
<PAGE> 7
EXHIBIT A
1998 STOCK PLAN
EXERCISE NOTICE
NETREX, INC.
3000 TOWN CENTER, SUITE 1100
SOUTHFIELD, MI 48075
Attention: Secretary
1. EXERCISE OF OPTION. Effective as the undersigned ("Optionee")
hereby elects to exercise Optionee's option to purchase shares of the Common
Stock (the "Shares") of Netrex, Inc. (the "Company") under and pursuant to the
1999 Stock Plan (the "Plan") and the Stock Option Agreement dated _____________,
19____ (the "Option Agreement").
2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company
the full purchase price of the Shares, as set forth in the Option Agreement.
3. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. RIGHTS AS SHAREHOLDER. Until the issuance of the Shares (as
evidenced by the appropriate entry on the books of the Company or of a any
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares shall be issued to
the Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 12 of the Plan.
5. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares held by
Optionee or any transferee (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section (the "Right of First Refusal").
(a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares
shall deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Shares, (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the bona fide cash price or other consideration for which the Holder
proposes to transfer the Shares (the "Offered Price"), and the Holder shall
offer the Shares at the offered Price to the Company or its assignee(s).
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<PAGE> 8
(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (c) below.
(c) PURCHASE PRICE. The purchase price ("Purchase Price")
for the Shares purchased by the Company or its assignee(s) under this Section
shall be the Offered Price. If the Offered Price includes consideration other
than cash, the rash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(d) PAYMENT. Payment of the Purchase Price shall be made, at
the option of the Company or its assignee(s), in cash (by check). by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(e) HOLDER'S RIGHT TO TRANSFER. If all of the Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Shares to that Proposed
Transferee at the Offered Price or at a higher price, provided that such sale or
other transfer is consummated within 120 days after the date of the Notice, that
any such sale or other transfer is effected in accordance with any applicable
securities laws and that the Proposed Transferee agrees in writing that the
provisions of tills Section shall continue to apply to the Shares in the hands
of such Proposed Transferee. If the Shares described in the Notice arc not
transferred to the Proposed Transferee within such period. a new Notice shall be
given to the Company, and the Company and/or its assignees shall again be
offered the Fight of First Refusal before any Shares held by the Holder may be
sold or otherwise transferred.
(f) EXCEPTIONS FOR CERTAIN FAMILY TRANSFERS. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to the Optionee's immediate family or a trust for the benefit of
the Optionee's immediate family shall be exempt from the provisions of this
Section. "Immediate Family" as used herein shall mean spouse, lineal descendant
or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so transferred subject to
the provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
(g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of
First Refusal shall terminate as to any Shares upon the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended.
6. TAX CONSULTATION Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in
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<PAGE> 9
connection with the purchase or disposition of the Shares and that Optionee is
not relying on the Company for any tax advice,
7. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. Optionee understands and agrees that the
Company shall cause the legends set forth below or legends substantially
equivalent thereto, to be placed upon any certificate(s) evidencing ownership of
The Sharer, together with any other legends That may be required by the Company
or by state or federal securities laws.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY
COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL
HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE
EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF
THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL
OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF
FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) STOP-TRANSFER NOTICES. Optionee agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required
(i) to transfer an its books any Shares that have been sold or otherwise
transferred in violation of any, of the provisions of this Agreement or (ii) to
treat as owner of such Shares or to accord the right to vote or pay dividends to
any purchaser or other transferee to whom such Shares shall have been so
transferred.
8. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
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<PAGE> 10
9. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
10. GOVERNING LAW; SEVERABILITY. This Agreement is governed by the
internal substantive laws but not the choice of law rules, of Michigan.
11. CONSENT TO VENUE; PERSONAL JURISDICTION. Optionee consents to
the personal jurisdiction of the Michigan courts. Optionee at any and all
disputes arising out of this Agreement shall be heard in the Oakland County
Circuit Court or the Southfield District Court in the state of Michigan.
12. ENTIRE AGREEMENT. The Plan and Option Agreement am incorporated
herein by reference. This Agreement, the Plan, the Option Agreement and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee.
Submitted by: Accepted by:
OPTIONEE NETREX, INC.
__________________________________ _____________________________________
Signature By
__________________________________ _____________________________________
Print Name Title
Address: Address:
3000 Town Center, Suite 1100
__________________________________ Southfield, MI 48075
__________________________________
_____________________________________
Date Received
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<PAGE> 11
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: NETREX, INC.
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In correction with the purchase of the above-listed Securities, the
undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities, Optionee
is acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year of any other fixed
period in the future. Optionee further understands that The Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company and any other legend required
under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifier under Rule 701 at the time of the grant of the Option w the Optionee,
the exercise will be exempt from registration under the Securities Act. In the
event the Company becomes subject
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<PAGE> 12
to the reporting requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, ninety (90) days thereafter (or such longer period as any market
stand-off agreement may require) the Securities exempt under Rule 701 may be
resold, subject to the satisfaction of certain of the conditions specified by
Rule 144, including: (1) the resale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the three month period not exceeding the Company, (3) the amount of
Securities being sold owing any limitations specified in Rule 144(e), and (4)
the timely filing of a Form 144, if applicable.
In the event that The Company does not qualify under Rule 701 at the
time of grant of the option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than one year after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less then two years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(d) Optionee further understands that in the event all of the
applicable requirements Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
Signature of Optionee:
___________________________________
Date: _____________________, 19____
11
