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SWITCHSOFT SYSTEMS, INC.,
1997 STOCK OPTION PLAN
AS ADOPTED EFFECTIVE MAY 30, 1997
AMENDED BY BOARD OF DIRECTORS ON MARCH 16, 1998
1. PURPOSE.
(a) The purpose of the SwitchSoft Systems, Inc., 1997 Stock Option
Plan (the "Plan") is to provide a means whereby selected eligible founder and
other employees and officers and directors of and consultants to SwitchSoft
Systems, Inc., a Delaware corporation (the "Company"), and its Affiliates, if
any, as defined below, may be given a favorable opportunity to acquire common
stock of the Company (the "Common Stock"), thereby encouraging such persons
to accept or continue a qualifying relationship with the Company; increasing
the interest of such persons in the Company's welfare through participation
in the growth and value of the Common Stock; and furnishing such persons with
an incentive to improve operations and increase profits of the Company. The
terms "Affiliate" or "Affiliates" as used in the Plan shall mean any parent
corporation or subsidiary corporation of the Company, as those terms are
defined in Sections 424(e) and (f) of the Internal Revenue Code of 1986, as
amended (the "Code").
(b) To accomplish the foregoing objectives, this Plan provides a
means whereby employees, directors, and consultants may receive options to
purchase Common Stock.
2. STOCK OPTIONS Stock options granted pursuant to the Plan may, at
the discretion of the Board of Directors of the Company, be granted either as
an Incentive Stock Option ("ISO") or as a Nonstatutory Stock Option ("NSO").
An ISO shall mean an option described in Section 422 of the Code. Art NSO
shall mean any option not meeting the requirements of Section 422 of the
Code. An option designated as an NSO will not be treated as an ISO.
3. ADMINISTRATION The Board of Directors (the "Board"), whose authority
shall be plenary, shall administer the Plan, unless and until such time as
the Board delegates administration of the Plan pursuant to subsection 3(b),
below.
(a) The Board, whose determinations shall be conclusive, shall have
the power, subject to and within the limits of the express provisions of the
Plan:
(i) To grant options pursuant to the Plan.
(ii) To determine from time to time which of the eligible
persons described in Section 5, below, shall be granted options under the
Plan, the number of shares for which each option shall be granted, the term
of each granted option and the time or times during the term of each option
within which all or portions of each option may be exercised (which at the
Board's discretion may be accelerated, if allowed under applicable law).
(iii) To construe and interpret the Plan and options granted
under it and to establish, amend, and revoke rules and regulations for its
administration. The Board, in the
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exercise of this power, shall generally determine all questions of policy and
expediency that may arise and may correct any defect, omission or
inconsistency in the Plan or in any option agreement with respect to the Plan
in a manner and to the extent it shall deem necessary or expedient to make
the Plan fully effective.
(iv) To grant options in exchange for cancellation of options
granted earlier at different exercise prices; PROVIDED, HOWEVER, nothing
contained herein shall empower the Board to grant an ISO under conditions or
pursuant to terms that are inconsistent with the requirements of subsection
4(b), below, or Section 422 of the Code.
(v) To prescribe the terms and provisions of each option
granted (which need not be identical) and the form of written instrument that
shall constitute the option agreement.
(vi) To amend the Plan as provided in Section 11 below.
(vii) Generally, to exercise such powers and to perform such
acts as are deemed necessary or expedient to promote the best interests of
the Company.
(viii) To take appropriate action to cause any option granted
hereunder to cease to be an ISO; PROVIDED, HOWEVER, no such action may be
taken by the Board without the written consent of the affected optionee.
(b) The Board may, by resolution, delegate administration of the
Plan (including, without limitation, the Board's powers under subsection 3(b)
above) to a committee acting under the authority of the Board. In the
event that the Company has registered any equity security under Section 12
of the Securities and Exchange Act of 1934, as amended (the "Act"), such
committee shall consist of not less than two (2) members of the Board each
of whom shall be a "disinterested person" and an "outside director." A member
of the Board is a "disinterested person" if at the time he exercises
discretion in administering the Plan he is not eligible and has not at any
time within one year prior thereto been eligible for selection as a person to
whom stock may be allocated or to whom stock options or stock appreciation
rights may be granted pursuant to the Plan or any other plan of the Company
(or Affiliate) entitling the participants therein to acquire stock, stock
options or stock appreciation rights of the Company or (Affiliate), or if he
otherwise satisfies the requirements of a "disinterested person" within the
meaning of Rule l6b-3 of the Act. A member of the Board is an "outside
director" if he is not a current employee of the Corporation (or Affiliate),
is not a former employee of the Corporation (or Affiliate) who is receiving
compensation for prior services, was not an officer of the Corporation (or
Affiliate) at any time, and currently is nor receiving compensation for
personal services to the Corporation (or Affiliate) in capacity other than as
a member of the Board, or if he otherwise satisfies the requirement of an
"outside director" as such term is defined for purposes of Section 162(m) of
the Code. The Board shall have complete discretion to determine the
composition, structure, form, term and operation of any committee established
to administer the Plan. The Board at any time may revest in the Board the
administration of the Plan.
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4. SHARES SUBJECT TO PLAN AND TO OPTION
(a) Subject to the provisions of Section 10, below (relating to
adjustments upon changes in stock), the stock which may be sold pursuant to
options granted under the Plan shall not exceed in the aggregate One Million
Seven Hundred Forty-Six Thousand Four Hundred Fifty (1,746,450) shares of the
Company's authorized Common Stock and may be unissued shares, reacquired
shares, or shares bought on the market for the purpose of issuance under the
Plan. If any options granted under the Plan shall for any reason terminate or
expire without having been exercised in full, the stock not purchased under
such options shall be available again for the purpose of the Plan.
(b) If the aggregate fair market value of stock with respect to
which ISOs are exercisable for the first time by any individual during any
calendar year exceeds the amount provided in Section 422(d) of the Code, such
options representing stock in excess of the Section 422(d) annual limitation
shall be deemed to be a grant of an NSO to the extent of such excess.
5. ELIGIBILITY
(a) All employees of the Company and its Affiliates are eligible to
receive ISOs and only employees of the Company and its Affiliates may
be granted ISOs. Directors of the Company who are not also employees of the
Company shall not be eligible for ISOs, but are eligible for NSOs.
Employees and independent contractors shall also be eligible for NSOs.
(b) No option issued under the Plan may be granted to a person who,
at the time such option would be granted, owns stock possessing more than
ten percent (10%) of the total combined voting power of all classes of
outstanding capital stock of the Company or any of its Affiliates unless
the option price is at least one hundred percent (100%) in the case of an
NSO, one hundred ten percent (110%) in the case of an ISO, of the fair market
value of the stock subject to the option and such option by its terms is
not exercisable after five (5) years from the date such option is granted.
Any employee may hold more than one (1) option at any time. For purposes of
this subsection 5(b), in determining stock ownership, an optionee shall be
considered as owning the voting capital stock owned, directly or
indirectly, by or for his brothers and sisters, spouse, ancestors and
lineal descendants. Voting capital stock owned, directly or indirectly, by
or for a corporation, partnership, estate or trust shall be considered as
being owned proportionately by or for its stockholders, partners or
beneficiaries, as applicable. Common Stock with respect to which any such
optionee holds an option shall not be counted. Additionally, for purposes
of this subsection 5(b), outstanding capital stock shall include all
capital stock actually issued and outstanding immediately after the grant
of the option to the optionee. Outstanding capital stock shall not include
capital stock authorized for issue under outstanding options held by the
optionee or by any other person.
6. TERMS OF OPTIONS. Options granted pursuant to the Plan need not be
identical, but each option shall be granted within ten (10) years from the
date the Plan is adopted by the Board or approved by the stockholders,
whichever is earlier, shall specify the number of shares to which it
pertains and shall be subject to the following terms and conditions:
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(a) The purchase price of each option shall be determined by the
administrator of the Plan at the time the option is granted, but shall in no
event, except as otherwise set forth in Section 5, above, be less than
eighty-five percent (85%) in the case of an NSO, or one hundred percent
(100%) in the case of an ISO, of the fair market value of the stock subject
to the option on the date the option is granted. For all purposes of the
Plan, the fair market value of the Common Stock shall be, if the Stock is
publicly traded, its closing bid price on NASDAQ or the over-the-counter
market, or if is traded on another exchange, the last price at which it
traded on such exchange. If the stock is not publicly traded, the fair
market value shall be such value as is determined in good faith by the Board
of Directors by taking into consideration the following factors: the
Company's net worth, prospective earning power and dividend-paying capacity,
and other relevant factors. "Other relevant factors" include the goodwill
of the business; the economic outlook in the particular industry; the
Company's position in the industry and its management; the degree of
control of the business represented by the block of stock to be valued;
and the values of securities of corporations engaged in the same or
similar lines of business which are listed on a stock exchange. In
addition to the relevant factors described above, consideration shall
also be given to non-operating assets, including proceeds of life
insurance policies payable to or for the benefit of the Company, to the
extent such non-operating assets have not been taken into account in the
determination of net worth, prospective earning power, and
dividend-earning capacity.
(b) Except as otherwise set forth in Section 5, above, the term
of any option shall not be greater than ten (10) years from the date it was
granted.
(c) An option by its terms, shall not be transferable otherwise
than by will or the laws of descent and distribution and may be exercisable,
during the lifetime of the option holder, only by the individual to whom
the option is granted. Notwithstanding the above, if an employee is
determined to be incompetent by a court of proper jurisdiction, his legal
representative may exercise the option on his behalf.
(d) Each option shall become exercisable on an annual basis as to
not less than twenty percent (20%) of the total number of shares subject
thereto.
(e) Options under the Plan may be exercised by a participant
regardless of whether he is employed by the Company or an Affiliate at the
time of exercise.
(f) Upon the termination of a participant's employment (defined as
the date the participant is no longer employed by either the Company
or any of its Affiliates), his rights to exercise an option then held by
him shall be only as follows:
(i) If a participant's employment is terminated for any
reason other than death or disability of the participant, he may, within
not more than one (l) month following such termination, or within such
longer period as the Board may fix, exercise the option to the extent such
option was exercisable by the participant on the date of termination of
his employment, or to the extent otherwise specified by the Board, which
may so specify at a time that is subsequent to the date of the termination of
his employment, provided that the date of exercise is in no event after the
expiration of the term of the option. However, if the participant's
employment is terminated due to Disability (within the meaning of Section
22(e) of the Code) of
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the participant, then this paragraph 6(e)(ii) shall apply to such participant
by substituting twelve (12) months for one (1) month.
(ii) If a participant's employment is terminated by death, his
estate shall have the right for a period of not more than twelve (12) months
following the date of death, or for such longer period as the Board may fix,
to exercise the option to the extent the participant was entitled to
exercise such option on the date of death, or to the extent otherwise
specified by the Board, which may so specify, at a time that is subsequent
to the date of death, provided the actual date of exercise is in no event
after the expiration of the term of the option. A participant's estate
shall mean his legal representative or any person who acquires the right
to exercise an option by reason of the participant's death.
(g) Options may also contain such other provisions, which
shall not be inconsistent with any of the foregoing terms, as the
Board shall deem appropriate. No option, however, nor anything
contained in the Plan, shall confer upon any employee any right to
continue in the employ of the Company (or Affiliate) nor limit in any way
the right of the Company (or Affiliate) to terminate his employment at
any time.
(h) Subject to any required action by the Company's stockholders, if
the Company shall be the surviving corporation in any merger,
business combination, reorganization or consolidation, each outstanding
option shall pertain and apply to the securities to which a holder of the
number of shares subject to the option would have been entitled, provided
that the excess of the aggregate fair market value of the shares subject to
the option immediately after such merger or consolidation over the
aggregate option price of such shares is not more than the excess of the
aggregate fair market value of all shares subject to the option
immediately before such merger or consolidation over the aggregate option
price of such shares. A dissolution or liquidation of the Company or a
merger, business combination, reorganization, or consolidation in which the
Company is not the surviving corporation shall cause each outstanding option
to terminate, unless the surviving corporation, in the case of a merger,
business combination, reorganization or consolidation, (i) assumes
outstanding options or replaces them with substitute options and (ii) the
excess of the aggregate fair market value of the shares subject to the
option immediately after the substitution or assumption over the aggregate
option price of such shares is not more than the excess of the aggregate
fair market value of all shares subject to the option immediately before
such substitution or assumption over the aggregate option price of such
shares.
7. PAYMENTS AND LOANS UPON EXERCISE.
(a) The purchase price of stock sold pursuant to an option shall be
paid either in full in cash or by certified check at the time the option is
exercised or to the extent permitted under the applicable provisions of
the Delaware General Corporation Law, pursuant to any deferred payment
arrangement that the Board in its discretion may approve; PROVIDED,
HOWEVER, that any interest to be paid by an optionee in connection with any
such deferred payment arrangement shall be charged interest at the
applicable federal rate as defined in Section 1274(d) of the Code.
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(b) The Company may make loans or guarantee loans made by an
appropriate financial institution to individual optionees, including
officers, on such terms as may be approved by the Board for the purpose of
financing the exercise of options granted under the Plan and the payment
of any taxes that may be due by reason of such exercise.
(c) In addition, if and to the extent authorized by the Board,
optionees may make all or any portion of any payment due to the Company
upon exercise of an option by delivery of any property (including
securities of the Company) other than cash, so long as such property
constitutes valid consideration for the stock under applicable law.
(d) Where the Company has or will have a legal obligation to
withhold taxes relating to the exercise of any stock option, such option
may not be exercised, in whole or in part, unless such tax obligation is
first satisfied in a manner satisfactory to the Company.
8. USE OF PROCEEDS FROM STOCK. Proceeds from the sale of stock
pursuant to options granted under the Plan shall be used for general
corporate purposes.
9. STOCK TRANSFER RESTRICTIONS; REPURCHASE PROVISIONS. Stock issued
pursuant to exercise of options granted under the Plan shall be subject
to those stock transfer restrictions and repurchase provisions which
shall be set forth in a Stock Restriction Agreement (the "Agreement"),
substantially in the form attached hereto as Exhibit A. Each individual
shall be required to execute the Agreement prior to receiving his shares.
Any shares purchased pursuant to an option shall be subject to the right of
first refusal as set forth in Article X of the Company's bylaws, or if
such bylaws provisions shall be amended or deleted, then by such
transfer restrictions as may then be adopted by the Board of Directors, if
any.
10. ADJUSTMENTS OF AND CHANGES IN THE STOCK. Subject to the provisions
set forth in subsection 6(h), above, in the event the shares of Common
Stock of the Company, as presently constituted, shall be changed into or
exchanged for a different number or kind of shares of stock or other
securities of the Company or of another corporation (whether by reason
of merger, consolidation, recapitalization, reclassification,
split-up, combination of shares, or otherwise), or if the number of
shares of Common Stock of the Company shall be increased through the
payment of a stock dividend, then there shall be substituted for or
added to each share of Common Stock of the Company theretofore
appropriated or thereafter subject or which may become subject to an option
under the Plan, the number and kind of shares of stock or other
securities into which each outstanding shares of Common Stock of the
Company shall be so changed, or for which each such share shall be exchanged
or to which each such share shall be entitled, as the case may be.
Outstanding options shall also be amended as to price and other terms if
necessary to reflect the foregoing events. In the event there shall be
any other change in the number or kind of the outstanding shares of Common
Stock of the Company, or of any stock or other securities into which such
Common Stock shall have been changed, or for which it shall have been
exchanged, then if the Board of Directors shall, in its sole discretion,
determine that such change equitably requires an adjustment in any option
theretofore granted or which may be granted under the Plan, such
adjustment shall be made in accordance with such determination. No right
to purchase fractional shares shall result from any adjustment in options
pursuant to this Section 10. In case of any such adjustment, the shares
subject to the option shall be rounded down to the nearest whole
share. Notice of any adjustment shall be given by the Company to
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each holder of an option which shall have been so adjusted and such
adjustment (whether or not such notice is given) shall be effective and
binding for all purposes of the Plan.
11. AMENDMENT OF THE PLAN. The Board at any time and from time to
time, may amend fire Plan, subject to the limitation, however, that, except
as provided in Section 10 (relating to adjustments upon changes in stock),
no amendment shall be effective, unless approved, within twelve (12)
months before or after the date of such amendment's adoption, by the vote or
written consent of a majority of the outstanding shares of the Company
entitled to vote, where such amendment will:
(a) increase the number of shares reserved for options under the
Plan;
(b) materially modified the requirements of Section 5 as to
eligibility for participation in the Plan; or
(c) materially increase the benefits accruing to participants under
the Plan.
It is expressly contemplated that the Board may amend the Plan in any
respect necessary to provide the Company's employees with the maximum
benefits provided or to be provided under Section 422 of the Code and the
regulations promulgated thereunder relating to employee incentive stock
options and/or to bring the plan or options granted under it into compliance
therewith.
Rights and obligations under any option granted before any amendment of
the Plan shall not be altered or impaired by amendment of the Plan, except
with the consent, which may be obtained in any manner deemed by the
Board to be appropriate, of the person to whom the option was granted.
12. TERMINATION OR SUSPENSION OF THE PLAN. The Board at any time may
suspend or terminate the Plan. The Plan, unless sooner terminated, shall
terminate at the end of ten (10) years from the date the Plan is adopted by
the Board or approved by the stockholders of the Company, whichever is
earlier. An option may not be granted under the Plan while the Plan is
suspended or after it is terminated.
Rights and obligations under any option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of
the Plan, except with the consent of the person to whom the option was
granted, which may be obtained in any manner that the Board deems appropriate.
13. TIME OF GRANTING OPTIONS. The date of grant of an option hereunder
shall, for all purposes, be the date on which the Board (or committee under
authority of the Board) makes the determination granting such option.
14. LISTING, QUALIFICATION OR APPROVAL OF STOCK; APPROVAL OF OPTIONS.
All options granted under the Plan are subject to the requirement that if
at any time the Board shall determine in its discretion that the
listing or qualification of the shares of stock subject thereto on any
securities exchange or under any applicable law, or the consent or
approval by any governmental regulatory body or the stockholders of the
Company, is necessary or desirable as a
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condition of or in connection with the issuance of shares under the
option, the option may not be exercised in whole or in part, unless
such listing, qualification, consent or approval shall have been effected
or obtained free of any condition not acceptable to the Board.
15. BINDING EFFECT OF CoNDITIONS. The conditions and stipulations
hereinabove contained or in any option granted pursuant to the Plan shall be
and constitute a covenant running with all of the shares of the
Company owned by the participant at any time, directly or indirectly
whether the same have been issued or not, and those shares of the Company
owned by the participant shall not be sold, assigned or transferred by any
person save and except in accordance with the terms and conditions herein
provided, and the participant shall agree to use his best efforts to cause
the officers of the Company to refuse to record on the books of the Company
any assignment or transfer made or attempted to be made, except as
provided in the Plan and to cause said officers to refuse to cancel old
certificates or to issue or deliver new certificates therefor where the
purchaser or assignee has acquired certificates for the stock represented
thereby, except strictly in accordance with the provisions of this Plan.
16. EFFECTIVE DATE OF PLAN. The Plan shall become effective as
determined by the Board but no options granted under it shall be
exercisable until the Plan has been approved by the vote or written consent
of the holders of a majority of the outstanding shares of the Company
entitled to vote. If such stockholder approval is not obtained within
twelve (12) months before or after the date of the Board's adoption of
the Plan, then all options previously granted under the Plan shall terminate,
and no further options shall be granted and no shares shall be issued.
Subject to such limitation, the Board may grant options under the Plan at
any time after the effective date and before the date fixed herein for
termination of the Plan.
17. GENDER. The use of any genera specific pronoun or similar term is
intended to be without legal significance as a gender.
18. FINANCIAL REPORTS. The Company shall provide financial and other
information regarding the Company, on an annual or more frequent basis, to
each individual holding an outstanding option under the Plan as required
under applicable law.
19. SUB-CHAPTER S ELECTION.
(a) All optionees who have exercised their options shall
cooperate with the Company, at Company's request, in maintaining its
Sub-Chapter S status, to the extent that such status exists at and after the
time the option is exercised. If an optionee who has exercised his
options, in whole or in part, becomes a Company shareholder, then such
person shall execute such documents as are reasonably requested by
Company to maintain such status. If such optionee/shareholder does
not so execute the requested documents or provide such assistance promptly
after Company's request therefor, the Company's President shall appointed
as optionee/shareholder's attorney-in-fact for the sole and limited
purpose of executing any and all such documents relating to such
Sub-Chapter S election in such optionee/shareholder's name as
if optionee/shareholder had actually signed same, all without further
liability to optionee/shareholder.
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(b) Notwithstanding any other provision hereof, if the Company's
Sub-Chapter S election status shall or may be adversely affected or
nullified by any optionee's proposed exercise of any option granted
hereunder, as determined in the discretion of the Board of Directors,
then the Company shall so advise an optionee in writing. In such instance,
such option shall not be subject to exercise until the Company shall
advise the optionee otherwise in writing, in which case the Company shall,
in its discretion, either (a) extend in writing the time period within
which the option may be exercised by a period equivalent to the time that
the option has been determined by the Board of Directors not to be so
exercisable or (b) pay optionee, as cash compensation, the difference
between the fair market value of the shares subject to exercise under the
option and the exercise price thereof at the time of the proposed
exercise. For purposes hereof, the fair market value of the shares shall
be the price set by the Board of Directors for incentive stock options or
for common stock at its most recent meeting at which options were awarded or
common stock was issued. If no such options were awarded or common stock
issued within sixty (60) days prior to the date that the Company makes the
cash compensation payment offer, then the fair market value of the shares
shall be that set by the Board of Directors in good faith determined as of
the date of the proposed exercise. The cash compensation shall be paid
by Company, if at all, within sixty (60) days after the date of the proposed
exercise.
20. COMPANY REPURCHASE RIGHT. If (1) an optionee under the Plan
has exercised his option and (2) such optionee leaves the employment of the
Company, for any or no reason, voluntarily or involuntarily, at any
time, then the Company shall have the right to repurchase the shares of
stock issued under a Plan option. The Company shall have the right to
repurchase said shares by offering to pay the optionee the fair market value
of the shares purchased under option. For purposes hereof, the fair market
value of the shares shall be the price set by the Board of Directors for
incentive stock options or common stock at its most recent meeting at which
options were awarded or common stock was issued. If no such options were
awarded or common stock issued within sixty (60) days prior to the date that
the Company makes the repurchase offer, then the fair market value of the
shares to be repurchased shall be that set by the Board of Directors in good
faith. The repurchase right must be exercised by Company, if at all, within
ninety (90) days alter optionee's last date of employment. The repurchase
right shall occur upon the Company's giving written notice to optionee
of its desire to repurchase the stock under the option. The Company shall
pay cash in a lump sum for such stock and/or cancel existing indebtedness
for the repurchase price. The Company may assign such repurchase right to
any other person in its discretion.
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EXHIBIT A
FORM OF STOCK RESTRICTION AGREEMENT
1.
