<PAGE>
As filed with the Securities and Exchange Commission on September 22, 1999
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
________________________
CRITICAL PATH, INC.
(Exact name of registrant as specified in charter)
________________________
<TABLE>
<CAPTION>
<S> <C> <C>
California 320 First Street 91-17883000
-------------------- San Francisco, California 94105 -------------------------------
(State of incorporation) (Address of principal executive offices) (I.R.S. Employer Identification No.)
-----------------------------------
</TABLE>
1996 Amplitude Stock Option Plan
1998 Stock Option Plan
1998 dotOne Stock Option Plan
1999 Employee Stock Purchase Plan
1999 Nonstatutory Stock Option Plan
(Full title of the plans)
________________________
Douglas T. Hickey
President and Chief Executive Officer
Critical Path, Inc.
320 1st Street
San Francisco, California 94105
(415) 808-8800
(Name, address, and telephone number, including area code, of agent for service)
________________________
Copy to:
Alan K. Austin, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
(650) 493-9300
- --------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum Maximum
Amount Offering Aggregate Amount of
to be Price Per Offering Registration
Title of Securities to be Registered Registered (1) Share Price Fee
---------------------------------------------- -------------- --------- --------- ------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.001
to be issued upon exercise of options
granted and outstanding and options
authorized and unissued under the 1996
Amplitude Stock Option Plan................ 584,175 shares $6.95 (2) $ 4,060,016.25 $ 1,128.69
to be issued upon exercise of options
granted and outstanding and options
authorized and unissued under the 1998
Stock Option Plan.......................... 9,724,669 shares $5.45 (3) $ 53,020,250.63 $ 14,739.63
to be issued upon exercise of options
granted and outstanding and options
authorized and unissued under the 1998
dotOne Stock Option Plan................... 74,587 shares $22.69 (4) $ 1,692,696.30 $ 470.57
to be issued under 1999 Employee Stock
Purchase Plan.............................. 600,000 shares $39.59 (5) $ 23,754,000.00 $ 6,603.61
to be issued upon exercise of options
granted and outstanding and options
authorized and unissued under the 1999
Nonstatutory Stock Option Plan............. 4,000,000 shares $34.23 (6) $ 136,928,750.00 $ 38,066.19
------------------ --------------- --------------
TOTAL 14,983,431 shares $ 219,455,713.18 $ 61,008.69
=========================================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Plan being registered pursuant
to this Registration Statement by reason of any stock dividend, stock
split, recapitalization or any other similar transaction effected without
the receipt of consideration which results in an increase in the number of
the Registrant's outstanding shares of Common Stock.
(2) Computed in accordance with Rules 457(h) and 457(c) under the Securities
Act of 1933. Such computation is based on the weighted average exercise
price of $3.77 per share covering 532,247 outstanding options and the
estimated exercise price of $39.59 per share covering 51,928 authorized but
unissued shares. The estimated exercise price of $39.59 per share was
computed in accordance with Rule 457 by averaging the high and low prices
of a share of Critical Path, Inc. Common Stock as reported on the Nasdaq
National Market on September 20, 1999.
(3) Computed in accordance with Rules 457(h) and 457(c) under the Securities
Act of 1933. Such computation is based on the weighted average exercise
price of $5.37 per share covering 9,700,862 outstanding options and the
estimated exercise price of $39.59 per share covering 23,807 authorized but
unissued shares. The estimated exercise price of $39.59 per share was
computed in accordance with Rule 457 by averaging the high and low prices
of a share of Critical Path, Inc. Common Stock as reported on the Nasdaq
National Market on September 20, 1999.
(4) Computed in accordance with Rules 457(h) and 457(c) under the Securities
Act of 1933. Such computation is based on the weighted average exercise
price of $2.77 per share covering 34,226 outstanding options and the
estimated exercise price of $39.59 per share covering 40,361 authorized but
unissued shares. The estimated exercise price of $39.59 per share was
computed in accordance with Rule 457 by averaging the high and low prices
of a share of Critical Path, Inc. Common Stock as reported on the Nasdaq
National Market on September 20, 1999.
(5) Estimated in accordance with Rule 457(h) solely for the purpose of
calculating the registration fee, based on the average price of the high
and low price as reported by the Nasdaq Stock Market on September 20, 1999,
which average is $39.59.
(6) Computed in accordance with Rules 457(h) and 457(c) under the Securities
Act of 1933. Such computation is based on the weighted average exercise
price of $33.88 per share covering 3,750,000 outstanding options and the
estimated exercise price of $39.59 per share covering 250,000 authorized
but unissued shares. The estimated exercise price of $39.59 per share was
computed in accordance with Rule 457 by averaging the high and low prices
of a share of Critical Path, Inc. Common Stock as reported on the Nasdaq
National Market on September 20, 1999.
<PAGE>
CRITICAL PATH, INC.
REGISTRATION STATEMENT ON FORM S-8
PART II
Item 3. Incorporation of Documents by Reference.
The following documents previously filed by Critical Path, Inc. (the
"Registrant") with the Securities and Exchange Commission (the "SEC") are hereby
incorporated by reference in this Registration Statement:
(a) The Registrant's Current Report on Form 8-K dated August 31, 1999;
(b) The Registrant's Current Report on Form 8-K dated August 2, 1999;
(c) The Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1999;
(d) Prospectus of the Registrant, dated June 1, 1999;
(e) The Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1999;
(f) The description of the Registrant's Common Stock contained in the
Registrant's Registration Statement on Form 8-A, dated February 1, 1999.
All documents filed by the Registrant pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Securities Exchange Act of 1934, as amended, on or after the
date of this Registration Statement 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 in this Registration Statement and to be part hereof
from the date of the filing of such documents.
Any statement contained in this Registration Statement or in a document
incorporated by reference in this Registration Statement shall be deemed to be
modified or superseded for purposes of this Registration Statement to the extent
that a statement contained in this Registration Statement or in any subsequently
filed document that is deemed to be incorporated by reference in this
Registration Statement modifies or supersedes such statement
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
1
<PAGE>
Item 6. Indemnification of Directors and Officers.
The Registrant's Amended and Restated Articles of Incorporation limit the
liability of the Registrant's directors for monetary damages to the maximum
extent permitted by California law. Such limitation of liability has no effect
on the availability of equitable remedies, such as injunctive relief or
rescission.
The Registrant's Amended and Restated Bylaws provide that the Registrant will
indemnify its directors and officers and may indemnify its employees and agents
(other than officers and directors) against certain liabilities to the maximum
extent permitted by California law. The Registrant has entered into
indemnification agreements with each of its current directors and officers and
certain of its key employees that provide for indemnification of, and
advancement of expenses to, such persons to the maximum extent permitted by
California law, including by reason of action or inaction occurring in the past
and circumstances in which indemnification and advancement of expenses are
discretionary under California law.
At the present time, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Registrant in which
indemnification would be required or permitted. The Registrant is not aware of
any threatened litigation or proceeding that may result in a claim for such
indemnification.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
-------- -----------
<C> <S>
5.1 Opinion of Wilson Sonsini Goodrich & Rosati.
10.1 1996 Amplitude Stock Option Plan
10.2* 1998 Stock Option Plan
10.3 1998 dotOne Stock Option Plan
10.4* 1999 Employee Stock Purchase Plan
10.5 1999 Nonstatutory Stock Option Plan
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
23.2 Consent of Ernst & Young LLP, Independent Auditors
23.3 Consent of Wilson Sonsini Goodrich & Rosati (contained in
Exhibit 5.1).
24.1 Power of Attorney (see signature page).
</TABLE>
* Incorporated by reference to the Registrant's Registration Statement on Form
S-1, as amended (No. 333-71499), which was declared effective on March 26, 1999.
2
<PAGE>
Item 9. Undertakings.
1. The 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 to include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
2. The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that
is incorporated by reference in the Registration Statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to law, the Registrant's Articles of Incorporation,
Bylaws or indemnification agreements, the Registrant has been advised that
in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by
a director, officer or controlling person of the Registrant in a
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered hereunder, 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 of whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, State of California, on September 21,
1999.
CRITICAL PATH, INC.
By:/s/ Douglas T. Hickey
________________________________________
Douglas T. Hickey
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Douglas T. Hickey and David Thatcher,
or either of them, his or her attorney-in-fact, with the power of substitution,
for him or her in any and all capacities, to sign any amendments to this
Registration Statement on Form S-8, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-in-
fact, or his substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
President and Chief Executive Officer and September 21, 1999
/s/ Douglas T. Hickey Director (Principal Executive Officer)
- ---------------------------
Douglas T. Hickey
Executive Vice President and Chief September 21, 1999
/s/ David Thatcher Financial Officer (Principal Financial and
- --------------------------- Accounting Officer)
David Thatcher
/s/ David C. Hayden Chairman of the Board September 21, 1999
- ---------------------------
David C. Hayden
Director September , 1999
- ---------------------------
Christos M. Cotsakos
Director September , 1999
- ---------------------------
Lisa Gansky
/s/ Kevin R. Harvey Director September 20, 1999
- ---------------------------
Kevin R. Harvey
Director September , 1999
- ---------------------------
James A. Smith
/s/ George Zachary
- --------------------------- Director September 21, 1999
George Zachary
</TABLE>
4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
-------- -----------
<C> <S>
5.1 Opinion of Wilson Sonsini Goodrich & Rosati
10.1 1996 Amplitude Stock Option Plan
10.2* 1998 Stock Option Plan
10.3 1998 dotOne Stock Option Plan
10.4* 1999 Employee Stock Purchase Plan
10.5 1999 Nonstatutory Stock Option Plan
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
23.2 Consent of Ernst & Young LLP, Independent Auditors
23.3 Consent of Wilson Sonsini Goodrich & Rosati (contained in
Exhibit 5.1).
24.1 Power of Attorney (see signature page).
</TABLE>
* Incorporated by reference to the Registrant's Registration Statement on Form
S-1, as amended (No. 333-71499), which was declared effective on March 26, 1999.
5
<PAGE>
EXHIBIT 5.1
-----------
[Letterhead of Wilson Sonsini Goodrich & Rosati]
September 22, 1999
Critical Path, Inc.
320 1st Street
San Francisco, California 94105
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-8 to be filed by you
with the Securities and Exchange Commission on or about September 22, 1999 (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of an aggregate of 14,983,431 shares of
Common Stock, par value $0.001(the "Shares"), both issued and outstanding and
unissued and reserved for issuance pursuant to (i) the 1996 Amplitude Stock
Option Plan, (ii) the 1998 Stock Option Plan, (iii) the 1998 dotOne Stock Option
Plan, (iv) the 1999 Employee Stock Purchase Plan and (v) the 1999 Nonstatutory
Stock Option Plan (together, the "Plans"). As your legal counsel, we have
examined the proceedings taken and are familiar with the proceedings proposed to
be taken by you in connection with the sale and issuance of the Shares under the
Plans.
It is our opinion that the Shares will be, when issued and sold in the
manner referred to in the Plans, legally and validly issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement and any subsequent amendment thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
<PAGE>
Exhibit 10.1
AMPLITUDE SOFTWARE CORP.
1996 STOCK PLAN
(as amended and restated on February 10, 1999)
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 and Consultants of
the Company and its Subsidiaries 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 of an Option and subject to the applicable provisions of Section 422 of
the Code and the regulations promulgated thereunder. 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 appointed
-------------
pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" means a Committee appointed by the Board of Directors
---------
in accordance with Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
------------
(f) "Company" means Amplitude Software Corp., a California corporation.
-------
(g) "Consultant" means any person who is engaged by the Company or any
----------
Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any Director of the Company whether
compensated for such services or not. If the Company registers any class of any
equity security pursuant to the Exchange Act, the term Consultant shall
thereafter not include Directors who are not compensated for their services or
are paid only a Director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship with the Company, any Parent or Subsidiary
is not interrupted or terminated. Continuous Status as an Employee or Consultant
shall not be considered interrupted 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. A leave of
absence approved by the Company shall include sick leave, military leave, or any
other personal leave approved by an authorized representative of the Company.
For purposes of Incentive Stock
<PAGE>
Options, no such leave may exceed 90 days, unless reemployment upon expiration
of such leave is guaranteed by statute or contract, including Company policies.
If reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, on the 91st 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.
(i) "Director" means a member of the Board of Directors of the Company.
--------
(j) "Employee" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "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 SmallCap 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.
(m) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an Option not intended to qualify
-------------------------
as an Incentive Stock Option.
(o) "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.
(p) "Option" means a stock option granted pursuant to the Plan.
------
<PAGE>
(q) "Optioned Stock" means the Common Stock subject to an Option or a
--------------
Stock Purchase Right.
(r) "Optionee" means an Employee or Consultant who receives an Option
--------
or Stock Purchase Right.
(s) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(t) "Plan" means this 1996 Stock Plan.
----
(u) "Restricted Stock" means shares of Common Stock acquired pursuant
----------------
to a grant of a Stock Purchase Right under Section 11 below.
(v) "Section 16(b)" means Section 16(b) of the Securities Exchange Act
-------------
of 1934, as amended.
(w) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 12 below.
(x) "Stock Purchase Right" means a right to purchase Common Stock
--------------------
pursuant to Section 11 below.
(y) "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 4,500,000 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, and the original purchaser of such Shares did
not receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.
4. Administration of the Plan.
--------------------------
<PAGE>
(a) Initial Plan Procedure. Prior to the date, if any, upon which the
----------------------
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or a Committee appointed by the Board.
(b) Plan Procedure After the Date, if any, upon Which the Company
-------------------------------------------------------------
becomes Subject to the Exchange Act.
- -----------------------------------
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3,
------------------------------
the Plan may be administered by different bodies with respect to Directors,
Officers and Employees who are neither Directors nor Officers.
(ii) Administration With Respect to Directors and Officers. With
-----------------------------------------------------
respect to grants of Options and Stock Purchase Rights to Employees who are also
Officers or Directors of the Company, the Plan shall be administered by (A) the
Board if the Board may administer the Plan in compliance with the rules under
Rule 16b-3 promulgated under the Exchange Act or any successor thereto ("Rule
16b-3") relating to the disinterested administration of employee benefit plans
under which Section 16(b) exempt discretionary grants and awards of equity
securities are to be made, or (B) a Committee designated by the Board to
administer the Plan, which Committee shall be constituted to comply with the
rules under Rule 16b-3 relating to the disinterested administration of employee
benefit plans under which Section 16(b) exempt discretionary grants and awards
of equity securities are to be made. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and remove all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by the rules under Rule 16b-3 relating to the
disinterested administration of employee benefit plans under which Section 16(b)
exempt discretionary grants and awards of equity securities are to be made.
(iii) Administration With Respect to Other Employees and
--------------------------------------------------
Consultants . With respect to grants of Options and Stock Purchase Rights to
- ------------
Employees or Consultants who are neither Directors nor Officers of the Company,
the Plan shall be administered by (A) the Board or (B) a Committee designated by
the Board, which committee shall be constituted in such a manner as to satisfy
the legal requirements relating to the administration of incentive stock option
plans, if any, of California corporate and securities laws, of the Code, and of
any applicable stock exchange (the "Applicable Laws"). Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(c) 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 subject to
<PAGE>
the approval of any relevant authorities, including the approval, if
required, of any stock exchange upon which the Common Stock is listed, the
Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(l) of the Plan;
(ii) to select the Consultants and Employees to whom Options and
Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of Shares to be covered by each such
award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions of any award granted
hereunder;
(vii) to determine whether and under what circumstances an Option
may be settled in cash under subsection 9(f) instead of Common Stock;
(viii) 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; and
(ix) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options or Stock Purchase Rights.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options and Stock Purchase Rights may be granted
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option or Stock
Purchase Right may, if otherwise eligible, be granted additional Options or
Stock Purchase Rights.
(b) Each Option shall be designated in the written 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
<PAGE>
(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 continuation of his or her
employment or consulting relationship with the Company, nor shall it interfere
in any way with his or her right or the Company's right to terminate his or her
employment or consulting relationship at any time, with or without cause.
(d) Upon the Company or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act or upon the Plan being assumed by a corporation having a class of
common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants of Options and
Stock Purchase Rights to Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options and Stock Purchase Rights to purchase more than 300,000 Shares.
(ii) In connection with his or her initial employment, an Employee
may be granted Options and Stock Purchase Rights to purchase up to an additional
300,000 Shares which shall not count against the limit set forth in subsection
(i) above.
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 12.
(iv) If an Option or Stock Purchase Right is cancelled in the same
fiscal year of the Company in which it was granted (other than in connection
with a transaction described in Section 12), the cancelled Option or Stock
Purchase Right shall be counted against the limit set forth in subsection (i)
above. For this purpose, if the exercise price of an Option or Stock Purchase
Right is reduced, such reduction will be treated as a cancellation of the Option
or Stock Purchase Right and the grant of a new Option or Stock Purchase Right.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company, as described in Section 18 of the Plan. 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 the term 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 than 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)
<PAGE>
years from the date of grant thereof 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 per
Share 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.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person 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 per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.
(B) granted to any other person, the per Share exercise price
shall be no less than 85% of the Fair Market Value per Share on the date of
grant.
(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 on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
a broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, 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.
------------------
<PAGE>
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
-----------------------------------------------
hereunder shall be exercisable at such times and under such conditions as
determined by the Administrator, including performance criteria with respect to
the Company and/or the Optionee, and as shall be permissible under the terms of
the Plan. Except in the case of Options granted to Officers, Directors and
Consultants, Options shall become exercisable at a rate of no less than 20% per
year over five (5) years from the date the Option is granted.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) hereof. Until
the issuance (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote, receive dividends or any other rights
as a shareholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. The Company shall issue (or cause to be issued)
such stock certificate promptly upon exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 12
hereof.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be 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 Employment or Consulting Relationship. In the event
----------------------------------------------------
of termination of an Optionee's Continuous Status as an Employee or Consultant
(but not in the event of an Optionee's change of status from Employee to
Consultant (in which case an Employee's Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the date three (3)
months and one day following such change of status) or from Consultant to
Employee), such Optionee may, but only within such period of time as is
determined by the Administrator, of at least thirty (30) days, with such
determination in the case of an Incentive Stock Option not exceeding three (3)
months after the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that the Optionee was
entitled to exercise it at the date of such termination. To the extent that the
Optionee was not entitled to exercise the Option at the date of such
termination, or if the Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event of termination of an
----------------------
Optionee's Continuous Status as an Employee or Consultant as a result of his or
her disability, the Optionee may, but only within twelve (12) months from the
date of such termination (and in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), exercise
<PAGE>
the Option to the extent otherwise entitled to exercise it at the date of such
termination. If such disability is not a "disability" as such term is defined in
Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such
Incentive Stock Option shall automatically cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option on the day three months and one day following such termination. To the
extent that the Optionee was not entitled to exercise the Option at the date of
termination, or if the Optionee does not exercise such Option to the extent so
entitled 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. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant) by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent that the Optionee was entitled to exercise the Option on the date of
death. If, at the time of death, the Optionee was not entitled to exercise his
or her entire Option, the Shares covered by the unexercisable portion of the
Option shall immediately revert to the Plan. If, after the Optionee's death,
the Optionee's estate or a person who acquires the right to exercise the Option
by bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b) of
----------
the Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
(f) 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 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. 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 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, which shall in no event exceed thirty (30) days from the date
upon which the Administrator makes the determination to grant the Stock Purchase
Right. The offer shall be accepted by execution of a Restricted Stock purchase
agreement
<PAGE>
in the form determined by the Administrator. Shares purchased pursuant to the
grant of a Stock Purchase Right shall be referred to herein as "Restricted
Stock."
(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 employment 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 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 the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the 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 or Merger.
----------------------------------------------------
(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 authorized 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 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.
<PAGE>
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least fifteen (15) days prior to such proposed action. To the
extent it has not been previously exercised, the Option or Stock Purchase Right
shall terminate immediately prior to the consummation of such proposed action.
(c) Merger. 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 may be assumed or an
equivalent option or right may be 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 Option or Stock Purchase Right shall automatically vest as
to the first 25% of the shares subject to the Option or Stock Purchase Right to
the extent such shares have not yet vested; provided, however, that such
acceleration shall apply only to the first Option or Stock Purchase Right
granted to an Optionee. In such event, the Administrator shall notify the
Optionee in writing or electronically that the Option or Stock Purchase Right
will not be assumed or substituted and that the Option or Stock Purchase Right
shall be exercisable for a period of fifteen (15) days from the date of such
notice to the extent the Option is then vested (after giving effect to the
limited acceleration provided by the previous sentence), 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
Stock Purchase 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 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 Employee or Consultant 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.
-------------------------------------
<PAGE>
(a) Amendment and Termination. The Board may at any time amend, alter,
-------------------------
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted, and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option or Stock Purchase Right,
the Company may require the person exercising such Option or Stock Purchase
Right to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.
16. 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.
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.
17. Agreements. Options and Stock Purchase Rights shall be evidenced by
----------
written agreements in such form as the Administrator shall approve from time to
time.
<PAGE>
18. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
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 connection with the Company assure their access to equivalent
information.
<PAGE>
Exhibit 10.3
dotOne Corporation
1998 STOCK OPTION PLAN
ARTICLE 1
GENERAL PROVISIONS
------------------
1.1 PURPOSE OF THE PLAN.
This 1998 Stock Option Plan (the "Plan") is intended to promote the
interests of dotOne Corporation, a Utah corporation, (the "Corporation") by
providing eligible persons with the opportunity to acquire a proprietary
interest or increase-their proprietary interest in the Corporation as an
incentive for them to remain in the Service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
1.2 ADMINISTRATION OF THE PLAN
a. Prior to the Section 12(g) Registration Date, the Plan shall be
administered by the Board or a committee of the Board.
b. Beginning with the Section 12(g) Registration Date, the Primary
Committee shall have sole and exclusive authority to administer the Plan with
respect to Section 16 Insiders. Administration of the Plan with respect to all
other persons eligible under the Plan 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 terminate the functions of any
Secondary Committee at any time 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 the Plan and any outstanding options
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 under
its jurisdiction or any option 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
<PAGE>
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 under the Plan.
f. 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 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, the acceleration of such vesting schedule,
the maximum term for which the option is to remain outstanding, whether the
option shares shall be subject to rights of repurchase and/or rights of first
refusal, and all other terms and conditions of the option grants.
1.3 ELIGIBILITY
The following persons shall be eligible to participate in the Plan:
a. Employees,
b. non-employee members of the Board or the board of directors of any
Parent or Subsidiary, and
c. consultants and other independent advisors who provide services to
the Corporation or any Parent or Subsidiary.
1.4 STOCK SUBJECT TO THE PLAN
a. The stock issuable under the Plan shall be shares of authorized
but unissued Common Stock. The maximum number of shares of Common Stock which
may be issued over the term of the Plan shall not exceed shares, which number of
shares may be changed from time to time in accordance with Section 3.4 below.
b. 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
2. However, should the Exercise Price be paid with shares of Common Stock or
should shares of Common Stock otherwise issuable under the Plan be withheld by
the Corporation in satisfaction of the withholding taxes incurred in connection
with the exercise of an option 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, and not by the net number of
shares of Common Stock issued to the holder of such option.
c. 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
-2-
<PAGE>
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 per calendar year,
and (iii) the number and/or class of securities and the Exercise Price 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.
ARTICLE 2.
OPTION GRANT PROGRAM
--------------------
2.1 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 shall be fixed by the Plan Administrator.
(2) The Exercise Price shall become immediately due upon exercise
of the option and shall, subject to the provisions of Article 3.1, and the
documents evidencing the option, be payable in one or more of the forms
specified below:
(a) cash or check made payable to the Corporation,
(b) 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
(c) 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 written instructions to (a) 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) 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.
-3-
<PAGE>
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. However, no option shall have a term in excess of ten (10) years
measured from the Grant Date.
c. Effect of Termination of Service
--------------------------------
(1) The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service:
(a) Any option outstanding at the time of the Optionee's
cessation of Service for any reason except death, Permanent Disability or
Misconduct shall remain exercisable for a three (3) month period thereafter,
provided no option shall be exercisable after the Expiration Date.
(b) Any option outstanding at the time of the Optionee's
cessation of Service due to death or Permanent Disability shall remain
exercisable for a twelve (12) month period thereafter, provided no option shall
be exercisable after the Expiration Date. Subject to the foregoing, any option
exercisable in whole or in part by the Optionee at the time of death may be
exercised subsequently by the personal representative of the Optionee's estate
or by 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.
(c) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall terminate
immediately and cease to be outstanding.
(d) During the applicable post-Service exercise-period, the
option may not be exercised in the aggregate for more than the number of shares
for which the option is exercisable on the date of the Optionee's cessation of
Service; the option shall, immediately upon the Optionee's cessation of Service,
terminate and cease to be outstanding to the extent the option is -riot
otherwise at that time exercisable. Upon the expiration of the applicable
exercise period or (if earlier) upon the Expiration Date, the option shall
terminate and cease to be outstanding for any shares for which the option has
not been exercised.
(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:
(a) extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service from the 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
Date, and/or
(b) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of shares of
Common Stock for which
-4-
<PAGE>
such option is exercisable at the time of the Optionee's cessation of Service
but also with respect to one or more additional shares that would have vested
under the option had the Optionee continued in Service.
d. 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.
e. Limited Transferability of Options. During the lifetime
----------------------------------
of the Optionee, Incentive Options may be exercised only by the Optionee, and
shall not be assignable or transferable except by will or the laws of descent
and distribution following the Optionee's death. Non-Statutory Options may be
assigned or transferred in whole or in part only (i) during the Optionee's
lifetime if in connection with the Optionee's estate plan to one or more members
of the Optionee's immediate family (spouse and children) or to a trust
established exclusively for the benefit of one or more such immediate family
members, or (ii) by will or the laws of descent and distribution following the
Optionee's death. 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.
2.2 INCENTIVE OPTIONS
The terms specified below shall apply to all Incentive Options.
Except as modified by the provisions of this Section 2.2, all the provisions of
this Plan shall apply to Incentive Options. Options specifically designated as
Non-Statutory Options when issued under the Plan shall not be subject to the
terms of this Section 2.2.
a. Eligibility. Incentive Options may only be granted to Employees.
-----------
b. Exercise Price. The Exercise Price shall not be less than one
--------------
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
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 in the
order in which such options are granted.
d. 10% Stockholder . If an Employee to whom an Incentive Option is
---------------
granted is a 10% Stockholder, then the Exercise Price shall not be less than one
hundred ten percent (110 %) of
-5-
<PAGE>
the Fair Market Value per share of Common Stock on the Grant Date, and the
option term shall not exceed five (5) years measured from the Grant Date.
2.3 CORPORATE TRANSACTION/CHANGE IN CONTROL
a. In the event of any Corporate Transaction, the Board of Directors
shall have the sole discretion to elect that 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.
The Board may exercise its discretion to accelerate the vesting of options
whether or not (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, except to the extent that 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, whose determination
shall be final, binding and conclusive.
b. In the event of any Corporate Transaction, the Board of Directors
shall have sole discretion to elect that all outstanding repurchase rights may
also be terminated automatically whether or not those repurchase rights are to
be assigned to the successor corporation (or Parent thereof) in connection with
such Corporate Transaction.
c. The Plan Administrator's discretion under Sections 2.3.a. and b.
above shall be exercisable either at the time the option is granted or at any
time while the option remains outstanding, 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.
d. If the Board of Directors elects the automatic acceleration of
some or all of the outstanding options upon the occurrence of a Corporate
Transaction, all such outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof) immediately following the consummation of the Corporate
Transaction.
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 that 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
-6-
<PAGE>
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.
f. The Plan Administrator shall have the discretion, exercisable at
the time the option is granted or at any time while the option remains
outstanding prior to a Corporate Transaction, to provide for the automatic
acceleration of any options assumed or replaced in a Corporate Transaction that
do not otherwise accelerate at that time (and the termination of any of the
Corporation's outstanding repurchase rights that do not otherwise terminate at
the time of the Corporate Transaction) in the event the Optionee's Service
should subsequently terminate by reason of an Involuntary Termination within
eighteen (18) months following the effective date of such Corporate Transaction.
Any options so accelerated shall remain exercisable for 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.
g. 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 prior to a Change in Control, to (i) provide for the automatic
acceleration of one or more outstanding options (and the automatic termination
of one or more outstanding repurchase 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 subsequent Involuntary Termination
of the Optionee's Service within a specified period (not to exceed eighteen (18)
months) following the effective date of such Change in Control. Any options
accelerated in connection with a Change in Control shall remain fully
exercisable until the expiration or sooner termination of the option term.
h. 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.
i. The grant of options under the Plan 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.
2.4 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 new options covering the same or different number of shares of
Common Stock but with an Exercise Price based on the Fair Market Value per share
of Common Stock on the new Grant Date.
-7-
<PAGE>
ARTICLE 3.
MISCELLANEOUS
-------------
3.1 FINANCING
a. The Plan Administrator may permit any Optionee to pay the option
Exercise Price by delivering a 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. Promissory notes may be authorized with or without
security or collateral. In all events, the maximum credit available to the
Optionee may not exceed the sum of (i) the aggregate option Exercise Price
payable for the Purchased Shares plus (ii) any federal, state and local income
and employment tax liability incurred by the Optionee in connection with the
option exercise.
b. The Plan Administrator may, in its discretion, determine that one
or more such promissory notes shall be subject to forgiveness by the Corporation
in whole or in part upon such terms as the Plan Administrator may deem
appropriate.
3.2 TAX WITHHOLDING
a. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options 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 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. Such right may be
provided to any such holder in either or both of the following formats:
(1) 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, 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.
(2) Stock Delivery. The election to deliver to the Corporation,
--------------
at the time the Non-Statutory Option is exercised, one or more shares of Common
Stock previously acquired by such holder (other than in connection with the
option exercise 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.
3.3 EFFECTIVE DATE AND TERM OF THE PLAN
a. The Plan shall become effective on the Plan Effective Date.
However, no shares shall be issued under the Plan pursuant to Incentive Options
until the Plan is approved by the Corporation's stockholders. If such
stockholder approval is not obtained within twelve (12) months
-8-
<PAGE>
after the Plan Effective Date, then all Incentive Options previously granted
under this Plan shall automatically convert into Non-Statutory Options.
b. The Plan shall terminate upon the earliest of (i) ________, (ii)
the date on which all shares available for issuance under the Plan shall have
been issued, or (iii) the termination of all outstanding options in connection
with a Corporate Transaction. Upon such Plan termination, all outstanding
options shall continue to have force and effect in accordance with the
provisions of the documents evidencing such options.
3.4 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 any rights and obligations with respect to
options at the time outstanding under the Plan unless each affected Optionee
consents to such amendment or modification. In addition, amendments to the Plan
shall be subject to approval of the Corporation's stockholders to the extent
required by applicable laws or regulations.
b. Options to purchase shares of Common Stock may be granted under
the Plan that are in each instance in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
issued are held in escrow until there is obtained Board approval (and
shareholder approval if required by applicable laws or regulations) of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan.
3.5 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.
3.6 REGULATORY APPROVALS
a. The implementation of the Plan, the granting of any option under
the Plan, and the issuance of any shares of Common Stock upon the exercise of
any option shall be subject to the Corporation's obtaining all approvals and
permits required by regulatory authorities having jurisdiction over the Plan and
the options granted under it, and the shares of Common Stock issued pursuant to
the Plan.
b. No shares of Common Stock 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 market, if applicable) on
which Common Stock is then listed for trading.
-9-
<PAGE>
3.7 NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee, which rights
are hereby expressly reserved by -each, -to terminate such person's Service at
any time for any reason, with or without cause.
-10-
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan and the Plan
Documents:
I. Board shall mean the Corporation's Board of Directors.
1. 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 l3d-3 of the
1934 Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's stockholders, which
the Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over a period of thirty-
six (36) consecutive months or less such that a majority of the Board members
ceases, by reason of one or more contested elections for Board membership, to be
comprised of individuals who either (A) have been Board members continuously
since the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of the Board
members described in clause (A) who were still in office at the time the Board
approved such election or nomination.
2. Code shall mean the Internal Revenue Code of 1986, as amended.
3. Common Stock shall mean the Corporation's common stock.
4. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different from the
persons holding those securities immediately prior to such transaction; or
(ii) the sale, transfer or other disposition of all substantially all
of the Corporation's assets in complete liquidation or dissolution of the
Corporation.
5. Eligible Director shall mean a non-employee Board member eligible
to participate in the Plan.
<PAGE>
6. 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.
7. Exercise Date shall mean the date on which the Corporation shall
have received written notice of the option exercise.
8. Exercise Price shall mean the exercise price per share as
specified in the Stock Option Grant.
9. Expiration Date shall mean the date on which the option expires as
specified in the Stock Option Grant.
10. 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 traded at the time 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.
(iii) If the Common Stock is not listed on any Stock Exchange nor
traded on the Nasdaq National Market, then the Fair Market Value shall be
determined by the Plan Administrator after taking into account such factors as
the Plan Administrator shall deem appropriate.
(iv) 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.
11. First Refusal Right shall mean the right granted to the Corporation in
Section E of the Stock Option Exercise Notice and Purchase Agreement.
12. Grant Date shall mean the date on which the option is granted to
Optionee as specified in the Stock Option Grant.
<PAGE>
13. Incentive Option shall mean an option which satisfies the
requirements of Code Section 422.
14. Involuntary Termination shall mean the termination of the Service
of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a change in
his or her position with the Corporation which materially reduces his or her
level of responsibility, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits and participation in corporate-
performance based bonus or incentive programs) by more than fifteen percent (15
%) or (C) a relocation of such individual's place of employment by more than
fifty (50) miles, provided and only if such change, reduction or relocation is
effected by the Corporation without the individual's consent.
15. Market Stand Off shall mean the market stand off restriction on
disposition of the Purchased Shares as specified in Section F of the Stock
Option Exercise Notice and Purchase Agreement.
16. Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee 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 or other person in the Service of the Corporation (or any Parent or
Subsidiary).
17. 1933 Act shall mean the Securities Act of 1933, as amended.
18. 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
19. Non-Statutory Option shall mean an option not intended to satisfy
the requirements of Code Section 422.
20. Optionee shall mean any person to whom an option is granted under
Plan.
21. Option Shares shall mean the number of shares of Common Stock
subject to the option as specified in the Stock Option Grant.
22. Owner shall mean Option and all subsequent holders of the
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Optionee.
<PAGE>
23. 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 or the other corporations
in such chain.
24. Permanent Disability or Permanently Disabled shall mean the
inability of the Optionee to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months 6r more.
25. Permitted Transfer shall mean (i) a gratuitous transfer of the
Purchased Shares, provided and only if Optionee obtains the Corporation's prior
written consent to such transfer, (ii) a transfer of title to the Purchased
Shares effected pursuant to Optionee's will or the laws of intestate succession
following Optionee's death, or (iii) a transfer to the Corporation in pledge as
security for any purchase-money indebtedness incurred by Optionee in connection
with the acquisition of the Purchased Shares.
26. Plan Administrator shall mean the particular entity, whether the
Board or a committee of the Board, which is authorized to administer the Plan
with respect to one or more classes of eligible persons, to the extent such
entity is carrying out its administrative functions under the Plan with respect
to the persons under its jurisdiction.
27. Plan Documents shall mean the Plan, the Stock Option Grant, Stock
Option Agreement and Stock Option Exercise Notice and Purchase Agreement,
collectively.
28. Plan Effective Date shall mean the date on which the Plan was
adopted by the Board.
29. Primary Committee shall mean the committee of two (2) or more
non-employee Board members (as defined in the regulations to Section 16 of the
1934 Act) appointed by the Board to administer the Plan with respect to Section
16 Insiders.
30. Purchased Shares shall mean the shares purchased upon exercise of
the Option.
31. Recapitalization shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other charge
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
32. Reorganization shall mean any of the following transactions:
(i) a merger or consolidation in which the Corporation is not the
surviving entity;
(ii) a sale, transfer or other disposition of all or substantially
all of the Corporation's assets;
<PAGE>
(iii) a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities are
transferred in whole or in part to a person or persons different from the
persons holding those securities immediately prior to the merger; or
(iv) any transaction effected primarily to change the state in
which the Corporation is incorporated or to create a holding company structure.
33. Repurchase Right shall mean the Corporation's right to repurchase
Purchased Shares as set forth in Section D of the Stock Option Exercise Notice
and Purchase Agreement.
34. SEC shall mean the Securities Exchange Commission.
35. Secondary Committee shall mean a committee of two (2) or more
Board members appointed by the Board to administer the Plan with respect to
eligible persons other than Section 16 Insiders.
36. 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.
37. 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.
38. Service shall mean the performance 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.
39. Stock Exchange shall mean either the American Stock Exchange, the
New York Stock Exchange, or another regional stock exchange.
40. Stock Option Exercise Notice and Purchase Agreement shall mean
the agreement of said title in substantially the form of Exhibit A to the Stock
Option Grant, pursuant to which Optionee gives notice of his intent to exercise
the option and Purchase Shares.
41. Stock Option Grant shall mean the Stock Option Grant document
pursuant to which Optionee has been informed of the basic terms of the option
evidenced thereby.
42. Subsidiary shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
43. Taxes shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options in
connection with the exercise of those options.
<PAGE>
44. 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).
<PAGE>
Grant No. __
dotOne Corporation
STOCK OPTION GRANT AND AGREEMENT
Stock Option Grant
<TABLE>
<CAPTION>
<S> <C>
Optionee: ______________
Address: ______________
Grant Date: ______________
Exercise Price: $____ per share
Number of Option Shares: _______ shares
Hire Date: ______________
Expiration Date: ______________
Type of Option: ___ Incentive Option ___ Non-Statutory Option
Issued Under SEC Rule 701: ___ Yes ___ No
</TABLE>
Exercise Schedule: _______________________________________________________
<PAGE>
Stock Option Agreement
This Stock Option Agreement ("Agreement") is made ______________, by and
between dotOne Corporation, a Utah corporation (the "Corporation") and, ________
Optionee under the Corporation's 1998 Stock Option Plan (the "Plan"). All
capitalized terms not defined herein should have the meaning set forth in the
Appendix to the Plan.
RECITALS
A. The Board of Directors has adopted the Plan for the purpose of
retaining the services of selected Employees, non-employee members of the Board
or of the board of directors of any Parent or Subsidiary, and consultants and
other independent advisors who provide services to the Corporation (or any
Parent or Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as of the
Grant Date, an option to purchase up to the number of Option Shares specified in
the Stock Option Grant. The Option Shares shall be purchasable from time to
time during the option term specified in paragraph 2 below at the Exercise
Price.
2. Option Term. This option shall have a term of six (6) years measured
from the Hire Date and shall accordingly expire at the close of business on the
Expiration Date, unless sooner terminated in accordance with paragraph 5 or 6
below.
3. Limited Transferability. This option shall be neither transferable
nor assignable, in whole or in part, by Optionee other than by will or by the
laws of descent and distribution following Optionee's death and may be
exercised, during Optionee's lifetime, only by Optionee. However, if this
option is designated a Non-Statutory Option in the Stock Option Grant, then this
option may also, in connection with Optionee's estate plan, be assigned in whole
or in part during Optionee's lifetime to one or more members of Optionee's
immediate family (spouse or children) or to a trust established exclusively for
the benefit of one or more such immediate family members. The assigned portion
may only be exercised by the person or persons who acquire a proprietary
interest in the option pursuant to the assignment. The terms applicable to the
assigned portion shall be the same as those in effect for this option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate.
4. Exercisability. This option shall become exercisable for the Option
Shares in one or more installments as specified in this Stock Option Grant. As
the option becomes exercisable for such installments, those installments shall
accumulate and the option shall remain exercisable for the
<PAGE>
accumulated installments until the Expiration Date or sooner termination of the
option term under paragraph 5 or 6 below.
5. Cessation of Service. The option term specified in Section 2 above
shall terminate (and this option shall cease to be outstanding prior to the
Expiration Date) should any of the following provisions become applicable:
a. Should Optionee cease to remain in Service for any reason (other
than death, Permanent Disability or Misconduct) while this option is
outstanding, then Optionee shall have a period of three (3) months (commencing
with the date of such cessation of Service) during which to exercise this
option, but in no event shall this option be exercisable at any time after the
Expiration Date.
b. Should Optionee die while this option is outstanding, then the
personal representative of Optionee's estate (or the person or persons to whom
the option is transferred pursuant to Optionee's will or in accordance with the
laws of descent and distribution) shall have the right to exercise this option.
Such right shall lapse and this option shall cease to be outstanding upon the
earlier of (1) the expiration of the twelve (12) month period measured from the
date of Optionee's death, or (2) the Expiration Date.
c. Should Optionee cease Service by reason of Permanent Disability
while this option is outstanding, then Optionee shall have a period of twelve
(12) months (commencing with the date of such cessation of Service) during which
to exercise this option. In no event shall this option be exercisable at any
time after the Expiration Date.
d. Should Optionee's Service be terminated for Misconduct, then this
option shall terminate immediately and cease to remain outstanding.
e. During the limited post-Service exercise period, this option may
not be exercised in the aggregate for more than the number of vested Option
Shares for which the option is exercisable on the date of the Optionee's
cessation of Service. Upon the expiration of such limited post-Service exercise
period or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding for any vested Option Shares for which the option has
not been exercised. To the extent this option is not otherwise exercisable for
vested Option Shares at the time of Optionee's cessation of Service, this option
shall immediately terminate and cease to be outstanding with respect to those
shares.
6. Special Termination of Option.
a. In the event of any Corporate Transaction, the Board of Directors
may determine, in its sole discretion, that this option shall automatically
accelerate so that this option shall, immediately prior to the-effective date of
the Corporate Transaction, become fully exercisable for all of the Option Shares
as fully-vested shares of Common Stock. The Board may elect to accelerate this
option whether or not: (i) this 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
<PAGE>
comparable option to purchase shares of the capital stock of the successor
corporation (or Parent thereof) or (ii) this option is to be replaced with a
cash incentive program of the successor corporation which preserves the spread
existing on the Option Shares for which this option is not exercisable at the
time of the Corporate Transaction (the excess of the Fair Market Value of those
Option Shares over the Exercise Price payable for such shares) and provides for
subsequent payout in accordance with the Exercise Schedule The determination of-
option comparability under clause (i) shall be made by the Board, and its
determination shall be final, binding and conclusive.
b. If the Board elects to accelerate this option pursuant to
paragraph 6.a. above, this option shall terminate and cease to be outstanding
immediately following the Corporate Transaction, except to the extent assumed by
the successor corporation (or Parent thereof) in connection with the Corporate
Transaction.
c. If this option is assumed in connection with a Corporate
Transaction, then immediately after such Corporate Transaction, this option
shall be appropriately adjusted to apply to the number and class of securities
which would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
d. This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. Adjustment in Option Shares. Should any change be made to the Common
Stock by reason of any split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the total number and/or class of securities
subject to this option, and (ii) the Exercise Price, in order to reflect such
change and thereby preclude a dilution or enlargement of benefits hereunder.
8. Stockholder Rights. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price, and become a holder of
record of the purchased shares.
9. Manner of Exercising Options.
a. In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable, Optionee
(or any other person or persons exercising this option) must take the following
actions:
(1) Execute and deliver to the Corporation a Stock Option
Exercise Notice and Purchase Agreement (Exhibit A) for the Option Shares for
which the option is exercised.
<PAGE>
(2) Pay the aggregate Exercise Price for the purchased shares in
one or more of the following forms:
(a) Cash or check made payable to the Corporation; or
(b) A promissory note payable to the Corporation, but only
to the extent authorized by the Plan Administrator in accordance with paragraph
13.
Should the Common Stock be registered under Section 12(g) of the 1934 Act
at the time the option is exercised, then, upon prior written approval of the
Plan Administrator, the Exercise Price may also be paid as follows:
(c) In shares of Common Stock held by Optionee (or any other
person or persons exercising the option) for the requisite period necessary to
avoid a charge to the Corporation's earnings for financial reporting purposes
and valued-at Fair Market Value on the Exercise Date; or
(d) Through a special sale and remittance procedure pursuant
to which Optionee (or any other person or persons exercising the option) shall
concurrently provide irrevocable written instructions (1) 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 (2) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete the sale.
Except to the extent the sale and remittance procedure is utilized in
connection with the option exercise, payment of the Exercise Price must
accompany the Stock Option Exercise Notice and Purchase Agreement delivered to
the Corporation in connection with the option exercise.
(3) Furnish to the Corporation appropriate documentation that the
person or persons exercising the option (if other than Optionee) have the right
to exercise this option.
(4) Execute and deliver to the Corporation such written
representations as may be requested by the Corporation in order for it to comply
with the applicable requirements of federal and state securities laws.
(5) Make appropriate arrangements with the Corporation (or Parent or
Subsidiary employing or retaining Optionee) for the satisfaction of all federal,
state and local income and employment tax withholding requirements applicable to
the option exercise.
b. As soon as practical after the Exercise Date, the Corporation
shall issue to, or, on behalf of Optionee (or any other person or persons
exercising this option), a share certificate for the Purchased Shares, with the
appropriate legends affixed thereto.
<PAGE>
c. In no event may this option be exercised for any fractional
shares.
10. Compliance with Laws and Regulations.
a. The exercise of this option and the issuance of the Option Shares
upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the NASDAQ National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
b. The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
11. Successors and Assigns. Except to the extent otherwise provided in
paragraphs 3 and 6 above, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's permitted assigns and the legal representatives, heirs
and legatees of Optionee's estate.
12. Notices. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated on the Stock Option Grant. All notices shall be deemed
effective upon personal delivery or upon deposit in the U.S. mail, postage
prepaid and properly addressed to the party to be notified.
13. Financing. The Plan Administrator may, in its absolute discretion and
without any obligation to do so, permit Optionee to pay the Exercise Price for
the purchase Option Shares by delivering a full-recourse promissory note payable
to the Corporation. The terms of any such promissory note (including the
interest rate, the requirements for collateral and the terms of repayment) shall
be established by the Plan Administrator in its sole discretion.
14. Construction. This Agreement and the option evidenced hereby are made
and granted pursuant to the Plan and are in all respects limited by and subject
to the terms of the Plan and the Stock Option Exercise Notice and Purchase
Agreement. All decisions of the Plan Administrator with respect to any question
or issue arising under the Plan or this Agreement shall be conclusive and
binding on all persons having an interest in this option.
15. Governing Law. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of Utah without resort
to its conflict-of-laws rules.
<PAGE>
16. Additional Terms Applicable to an Incentive Option. In the event this
option is designated an Incentive Option in this Stock Option Grant, the
following terms and conditions shall also apply to the grant:
a. This option shall cease to qualify for favorable tax treatment as
an Incentive Option if (and to the extent) this option is exercised for one or
more Option Shares: (1) more than three (3) months after the date Optionee
ceases to be an Employee or in the Service of the Corporation for any reason
other than death or Permanent Disability or (2) more than twelve (12) months
after the date Optionee ceases to be an Employee by reason of Death or Permanent
Disability.
b. No installment under this option shall qualify for favorable tax
treatment as an Incentive Option if (and to the extent) the aggregate Fair
Market Value (determined at the Grant Date) of the Common Stock for which such
installment first becomes exercisable hereunder would, when added to the
aggregate value (determined as of the respective date or dates of grant) of any
earlier installments of the Common Stock and any other securities for which this
option or any other Incentive Options granted to Optionee prior to the Grant
Date (whether under the Plan or any other option plan of the Corporation or any
Parent or Subsidiary) first become exercisable during the same calendar year,
exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should such
One Hundred Thousand Dollar ($100,000) limitation be exceeded in any calendar
year, this option shall nevertheless become exercisable for the excess shares in
such calendar year as a Non-Statutory Option.
c. Should the Board elect to accelerate the exercisability of this
option upon a Corporate Transaction, then this option shall qualify as an
Incentive Option only to the extent the aggregate Fair Market Value (determined
at the Grant Date) of the Common Stock for which this option first becomes
exercisable in the calendar year in which the Corporate Transaction occurs does
not, when added to the aggregate value (determined as of the respective date or
dates of grant) of the Common Stock or other securities for which this option or
one or more other Incentive Options granted to Optionee prior to the Grant Date
(whether under the Plan or any other option plan of the Corporation or any
Parent or Subsidiary) first become-exercisable during the same calendar year,
exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should the
applicable One Hundred Thousand Dollar ($100,000) limitation be exceeded in the
calendar year of such Corporate Transaction, the option may nevertheless be
exercised for the excess shares in such calendar year as a Non-Statutory Option.
d. Should Optionee hold, in addition to this option, one or more
other options to purchase Common Stock which become exercisable for the first
time in the same calendar year as this option, then the foregoing limitations on
the exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
e. The grant of this option is subject to approval of the Plan by
Corporation's stockholders within twelve (12) months after the adoption of the
Plan by the Board. In the event that such stockholder approval is not obtained,
then this option shall not qualify as an Incentive Option.
<PAGE>
f. If the Option Shares covered by this Agreement exceed, as of the
Grant Date, the number of shares of Common Stock which may without stockholder
approval be issued under the Plan, then this option shall cease to qualify as an
Incentive Option unless stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained in accordance with the provisions of the Plan.
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the Grant Date first
noted above.
dotOne Corporation
By _____________________________________
Title___________________________________
ACKNOWLEDGEMENT
Optionee understands and agrees that the option is granted subject to and
in accordance with the terms of the Corporation's 1998 Stock Option Plan (the
"Plan"). Optionee further agrees to be bound by the terms of the Plan and the
terms of the option as set forth in this Agreement. Optionee understands that
any Option Shares purchased under the option shall be subject to the terms set
forth in the Stock Option Exercise Notice and Purchase Agreement attached hereto
as Exhibit A.
Optionee hereby acknowledges receipt of a copy of the Plan in the form
attached hereto as Exhibit B, and represents that Optionee has read and
understands the Plan, and accepts this option subject to all terms and
provisions of the Plan and the Plan documents. Optionee hereby agrees to accept
as binding, conclusive and final, all decisions and interpretations of the Board
of Directors upon any questions arising under the Plan. Optionee acknowledges
that there may be adverse tax consequences upon exercise of this option and/or
upon disposition of the Shares, and that Optionee should consult a tax advisor
prior to such exercise or disposition.
OPTIONEE
________________________________________
Optionee
________________________________________
Date
<PAGE>
EXHIBIT A
---------
STOCK OPTION EXERCISE NOTICE AND PURCHASE AGREEMENT
---------------------------------------------------
<PAGE>
dotOne Corporation
STOCK OPTION EXERCISE NOTICE
AND PURCHASE AGREEMENT
This Stock Option Exercise Notice and Purchase Agreement ("Agreement") is
made as of this day of ____________, ,19__, by and between dotOne Corporation, a
____________ corporation and ____________, Optionee under the Corporation's 1998
Stock Option Plan (the "Plan"). All capitalized terms used in this Agreement
and not defined herein shall have the meaning assigned to them in the Appendix
to the Plan.
A. EXERCISE OF OPTION
1. Exercise. Optionee hereby elects to exercise Optionee's option
to purchase____________ (________) shares of Common Stock (the "Purchased
Shares") of the Corporation, pursuant to that certain option (the "Option")
granted Optionee on ____________, 19___ (the "Grant Date") to purchase
____________ shares of Common Stock under the Plan at the exercise price of
$________ per share (the "Exercise Price").
2. Payment. Concurrent with the delivery of this Agreement to the
Corporation, Optionee shall pay the Exercise Price for the Purchased Shares in
accordance with the provisions of the Stock Option Grant and shall deliver
whatever additional documents may be required by the Stock Option Grant as a
condition for exercise with respect to the Purchased Shares.
3. Stockholder Rights. Until such time as the Corporation exercises
the Repurchase Right or the First Refusal Right, Optionee (or any successor in
interest) shall have all the rights of a stockholder (including voting, dividend
and liquidation rights) with respect to the Purchased Shares, subject, however,
to the transfer restrictions of Articles B and C, below.
B. SECURITIES LAW COMPLIANCE
1. Restricted Securities. The Purchased Shares have not been
registered under the 1933 Act and are being issued to Optionee in reliance upon
the exemption from such registration noted below. Optionee hereby confirms that
Optionee has been informed that the Purchased Shares are restricted securities
under the 1933 Act and may not be resold or transferred unless the Purchased
Shares are first registered under the federal securities laws or unless an
exemption from such registration is available. Accordingly, Optionee
acknowledges that Optionee is prepared to hold the Purchased Shares for an
indefinite period and that Optionee is aware that SEC Rule 144 of the 1933 Act,
which exempts certain resales of unrestricted securities, is not presently
available to exempt the resale of the Purchased Shares from the registration
requirements of the 1933 Act. The Option Shares are being issued under the Act
pursuant to (check the applicable box):
<PAGE>
the exemption in Rule 504;
the exemption in Rule 505;
the exemption in Rule 506;
the exemption in Section 4(2);
a Regulation A Offering Circular, dated ____________;
the exemption in Rule 701;
other:________________________________________________.
2. Restrictions on Disposition of Purchased Shares. Optionee shall
make no disposition of the Purchased Shares (other than a Permitted Transfer)
unless and until there is compliance with all of the following requirements:
a. Optionee shall have provided the Corporation with a written
summary of the terms and conditions of the proposed disposition.
b. Optionee shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
c. Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that (1) the
proposed disposition does not require registration of the Purchased Shares under
the 1933 Act and applicable state law, or (2) all appropriate action necessary
for compliance with the registration requirements of the 1933 Act and applicable
state law or any exemption from registration available under the 1933 Act and
applicable state law (including Rule 144) has been taken.
The Corporation shall not be required (i) to transfer on its books any
Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement, or, (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
3. Restrictive Legends. The stock certificates for the Purchased
Shares shall be endorsed with the following restrictive legends:
a. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 OR APPLICABLE STATE LAW. THE
SHARES MAY NOT BE SOLD OR OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED IN THE U.S.A. IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER SUCH ACT, (2) A 'NO ACTION' LETTER OF THE
SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH SALE OR OFFER, OR (3)
SATISFACTORY ASSURANCES TO THE CORPORATION THAT REGISTRATION UNDER SUCH ACT IS
NOT REQUIRED WITH RESPECT TO SUCH SALE OR OFFER.
b. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN REPURCHASE RIGHTS, RIGHTS OF FIRST REFUSAL, AND
<PAGE>
MARKET STAND-OFF AGREEMENT GRANTED TO THE CORPORATION AND ACCORDINGLY MAY NOT BE
SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED, OR IN ANY MANNER DISPOSED OF EXCEPT IN
CONFORMITY WITH THE TERMS OF A WRITTEN AGREEMENT DATED ____________, 19__,
BETWEEN THE CORPORATION AND THE REGISTERED HOLDER OF THE SHARES (OR THE
PREDECESSOR IN INTEREST TO THE SHARES). A COPY OF SUCH AGREEMENT IS MAINTAINED
AT THE CORPORATION'S PRINCIPAL CORPORATE OFFICES.
C. TRANSFER RESTRICTIONS
1. Restriction on Transfer. Except for any Permitted Transfers,
Purchased Shares shall not be transferred, assigned, encumbered or otherwise
disposed of in contravention of the Repurchase Right, First Refusal Right, or
the Market Stand-Off, as set forth in Sections D, E and F below.
2. Transferee Obligations. Each person (other than the Corporation)
to whom the Purchased Shares are transferred by means of a Permitted Transfer
must, as a condition precedent to the validity of such transfer, acknowledge in
writing to the Corporation that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to (i) the Repurchase
Right, (ii) the First Refusal Right, and (iii) the Market Stand-Off, to the same
extent such shares would be so subject if retained by Optionee.
D. REPURCHASE RIGHT
All of the Purchased Shares acquired by Optionee pursuant to this
Stock Option Exercise Notice and Agreement shall be subject to the Repurchase
Right set forth in this Section.
1. Exercise of Repurchase Right. In the event Optionee ceases to be
employed by the Corporation (including a Parent or Subsidiary of the
Corporation) for any reason, or no reason, with or without cause, or in the
event that Optionee is a legatee or personal representative of a deceased or
disabled present or former employee (or non-employee director) of the
Corporation, the Corporation and/or its assignee(s) shall have the right, at any
time within 60 days after (i) the date Optionee ceases to be employed by (or in
the Service of) the Corporation (or Parent or Subsidiary of the Corporation), or
(ii) the date on which Optionee acquires the Shares, whichever occurs later, to
purchase from Optionee or his personal representative, as the case may be, at
the purchase price per share determined in accordance with paragraph D.3. below
("Option Price") up to the number of Purchased Shares acquired hereunder by
Optionee.
2. Notice. Within 30 days following (i) the termination of
Optionee's employment (or Service) with the Corporation (or Parent or Subsidiary
of the Corporation), or (ii) the date on which Optionee acquires the Purchased
Shares, whichever occurs later, the Corporation and/or its assignee(s) shall
notify Optionee by written notice whether it wishes to purchase the Purchased
Shares pursuant to exercise of the Repurchase Right. If the Corporation and/or
its assignee(s) elects to purchase the Purchased Shares hereunder, it shall set
a date (within 30 days of the date of such notice) for the closing of the
transaction at a place and time specified by
<PAGE>
the Corporation and/or its assignee(s) in the notice or, at the Corporation's
and/or its assignee(s)' option, such closing may be consummated by mail. At such
closing, the Corporation and/or its assignee(s) shall tender payment for the
Shares and the certificates representing the Shares so purchased shall be
delivered to the Corporation and/or its assignee(s) and, if appropriate, shall
be cancelled.
3. Option Price. The Option Price shall be within the range of the
following amounts: (i) the Exercise Price as set forth in the Grant or (ii) the
then current fair market value per share as shall be determined in good faith by
the Corporation's Board of Directors. The determination of which price within
that range to be used in any particular instance shall be made by the
Corporation's Board of Directors in its sole discretion.
4. Payment. The Option Price shall be payable, in the discretion of
the Corporation and/or its assignee(s) by cancellation of all or a portion of
any outstanding indebtedness of Optionee to the Corporation or in cash (by
check) or both.
5. Recapitalization/Reorganization.
a. Any new, substituted or additional securities or other
property which is by reason of any Recapitalization distributed with respect to
the Purchased Shares shall be immediately subject to the Repurchase Right, but
only to the extent the Purchased Shares are covered by such right at the time.
b. In the event of a Reorganization, the Repurchase Right shall
remain in full force and effect and shall apply to the new capital stock or
other property received in exchange for the Purchased Shares in consummation of
the Reorganization, but only to the extent the Purchased Shares are covered by
such right at the time.
6. Termination of Repurchase Right. The Repurchase Right shall
terminate upon the earlier to occur of (i) a determination by the Board that a
public market exists for the outstanding shares of Common Stock, or (ii) a firm
commitment underwritten public offering, pursuant to an effective registration
statement under the 1933 Act, covering the offer and sale of the Common Stock in
the aggregate amount of at least Ten Million Dollars ($10,000,000).
E. FIRST REFUSAL RIGHT
1. Grant. The Corporation is hereby granted the right of first
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares. For purposes of this Section E, the term
"transfer" shall --include any sale, assignment, pledge, encumbrance, gift or
any other disposition of the Purchased Shares intended to by made by Owner, but
shall not include any Permitted Transfer.
2. Notice of Intended Disposition. In the event any Owner of
Purchased Shares desires to accept a bona fide third-party offer for the
transfer of any or all of such shares (the Purchased Shares subject to such
offer are hereinafter referred to as the "Target Shares"), Owner
<PAGE>
shall promptly (i) deliver to the Corporation written notice (the "Disposition
Notice") of the terms of the offer, including the offered purchase price and the
identify of the third-party offeror, and (ii) provide satisfactory proof that
the disposition of the Target Shares to such third-party offer would not be in
contravention of the provisions set forth in Sections B and C above.
3. Exercise of the First Refusal Right. The Corporation shall, for
a period of thirty (30) days following receipt of the Disposition Notice, have
the right to repurchase any or all of the Target Shares subject to the
Disposition Notice upon the same terms as those specified therein or upon such
other terms (not materially different from those specified in the Disposition
Notice) to which Owner consents. The Corporation shall exercise such First
Refusal Right by delivering written notice of the Corporation's determination to
purchase all or any part of the Target Shares (the "Exercise Notice") to Owner
prior to the expiration of the thirty (30) day exercise period. If such First
Refusal Right is exercised with respect to all the Target Shares, then the
Corporation shall effect the repurchase of such shares, including payment of the
purchase price, not more than fifteen (15) business days after delivery of the
Exercise Notice; and at such time the certificates representing the Target
Shares shall be delivered to the Corporation.
Should the purchase price specified in the Disposition Notice be payable in
property other than cash or evidences of indebtedness, the Corporation shall
have the right to pay the purchase price in the form of cash equal in amount to
the value of such property. If Owner agree on such cash value within thirty
(30) days after the Corporation's receipt of the Disposition Notice, the
valuation shall be made by an appraiser of recognized standing selected by Owner
and the Corporation or, if they cannot agree on an appraiser within forty-five
(45) days after the Corporation's receipt of the Disposition Notice, each shall
select an appraiser of recognized standing, whose appraisal shall be
determinative of such value. The cost of such appraisal shall be shared equally
'by Owner and the Corporation. The closing shall then be held on the later of
(a) the fifteenth (15th) business day following delivery of the Exercise Notice
or, (b) the fifteenth (15th) business day after such valuation shall have been
made.
4. Non-Exercise of the First Refusal Right. In the event the
Exercise Notice is not given to Owner prior to the expiration of the forty-five
(45) day exercise period, Owner shall have a period of thirty (30) days
thereafter in which to sell or otherwise dispose of the Target Shares to the
third-party offeror identified in the Disposition Notice upon terms (including
the purchase price) no more favorable to such third-party offeror than those
specified in the Disposition Notice; provided, however, that any such sale or
disposition must not be effected in contravention of the provisions of Sections
B and F. The third-party offeror shall acquire the Target Shares free and clear
of the First Refusal Right, but the acquired shares shall remain subject to
Sections B and F. In the event Owner does not effect such sale or disposition
of the Target Shares within the specified thirty (30) day period, the First
Refusal Right shall continue to be applicable to any subsequent disposition of
the Target Shares by Owner until such right lapses.
5. Recapitalization/Reorganization
a. Any new, substituted or additional securities or other
property which is by reason of any Recapitalization distributed with respect to
the Purchased Shares shall be
<PAGE>
immediately subject to the First Refusal Right, but only to the extent the
Purchased Shares are covered by such right at the time.
b. In the event of a Reorganization, the First Refusal Right
shall remain in full force and effect and shall apply to the new capital stock
or other property received in exchange for the Purchased Shares in consummation
of the Reorganization, but only to the extent the Purchased Shares are covered
by such right at the time.
6. Termination of First Refusal Right. The First Refusal Right
shall terminate upon the earlier to occur of (i) a determination is made by the
Board that a public market exists for the outstanding shares of Common Stock, or
(ii) a firm commitment underwritten public offering, pursuant to an effective
registration statement under the 1993 Act, covering the offer and sale of the
Common stock in the aggregate amount of at least ten million dollars
($10,000,000).
7. Assignment. The Corporation may assign the First Refusal Right
to any person or entity selected by the Board, including (without limitation)
one or more stockholders of the Corporation.
F. MARKET STAND-OFF AGREEMENT
1. Restriction on Transfer. In connection with any underwritten
public offering by the Corporation of its equity securities pursuant to an
effective registration statement filed under the 1933 Act, including the
Corporation's initial public offering, Owner shall not sell, make any short sale
of, loan, hypothecate, pledge, grant any option for the purchase of, or
otherwise dispose or transfer for value or otherwise agree to engage in any of
the foregoing transactions with respect to, any Purchased Shares without the
prior written consent of the Corporation or its underwriters. Such restrictions
(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. In no event, however, shall
such period exceed one hundred eighty (180) days and the Market Stand-Off shall
in all events terminate two (2) years after the effective date of the
Corporation's initial public offering.
2. Officers and Directors. Owner shall be subject to the Market
Stand-Off provided and only if the officers and directors of the Corporation are
also subject to similar restrictions.
3. Additional Shares. Any new, substituted or additional securities
which are, by reason of any Recapitalization or Reorganization, distributed with
respect to the Purchased Shares shall be immediately subject to the Market
Stand-Off, to the same extent the Purchased Shares are at such time covered by
such provisions.
4. Stop Transfer. In order to enforce the Market Stand-Off, the
Corporation may impose stop-transfer instructions with respect to the Purchased
Shares until the end of the applicable stand-off period.
<PAGE>
G. ESCROW
1. Escrow. As security for the faithful performance of this
Agreement, Optionee agrees, immediately upon receipt of the certificates
evidencing the Shares, to deliver such certificates, together with a stock power
in the form attached hereto, executed by Optionee (with the date and number of
Shares left blank), to the Secretary of the Corporation or its designee ("Escrow
Holder"), who is hereby appointed to hold such certificates and stock power in
escrow and to take all such actions and to effectuate all such transfers and/or
releases of such Shares as are in accordance with the terms of this Agreement.
Optionee and the Corporation agree that Escrow Holder shall not be liable to any
party to this Agreement (or to any other party) for any actions or omissions
unless Escrow Holder is grossly negligent relative thereto. The-Escrow Holder
may rely upon any letter, notice, or other document executed by any signature
purported to be genuine and may rely on advice of counsel and obey any order of
any court with respect to the transactions contemplated herein. The Shares
shall be released from escrow upon termination of all of the restrictions set
forth in Sections D, E, and F above.
H. MISCELLANEOUS PROVISIONS
1. No Employment or Service Contract. Nothing in this Agreement or
in the Plan shall confer upon Optionee any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Parent or Subsidiary employing or
retaining Optionee) or of Optionee, which rights are hereby expressly reserved
by each, to terminate Optionee's Service at any time for any reason with or
without cause.
2. Notices. Any notice required to be given under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days' advance written notice under this
paragraph to all other parties to this Agreement.
3. No Waiver. The failure of the Corporation in any instance to
exercise the First Refusal Right shall not constitute a waiver of any other
rights of first refusal that may subsequently arise under the provisions of this
Agreement or any other agreement between the Corporation and Optionee. No
waiver of any breach or condition of this Agreement shall be deemed to be a
waiver of any other or subsequent breach or condition, whether of like or
different nature.
4. Cancellation of Shares. If the Corporation shall make available,
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
<PAGE>
5. Optionee Undertaking. Optionee hereby agrees to take whatever
additional action and execute whatever additional documents the Corporation may
deem necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either Optionee or the Purchased Shares
pursuant to the provisions of this Agreement.
6. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Utah without resort to
that State's conflict-of-laws rules.
7. Successors and Assigns. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon Optionee, Optionee's permitted assigns and the legal
representatives, heirs and legatees of Optionee's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first indicated above.
dotOne Corporation
By:_____________________________________
Title:__________________________________
________________________________________
_________________________________________
OPTIONEE
Address:________________________________
________________________________________
<PAGE>
STOCK POWER-AND- ASSIGNMENT
SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Option Exercise
Notice and Agreement dated as of ____________, the undersigned hereby sells,
assigns and transfers unto __________________, ____________ shares of the common
stock of dotOne Corporation, a Utah corporation, standing in the undersigned's
name on the books of said corporation represented by Certificate No. delivered
herewith, and does hereby irrevocably constitute the Secretary of said
corporation as attorney-in-fact, with full power of substitution, to transfer
said stock on the books of said corporation.
Dated:____________________________ ______________________________________
(Signature)
______________________________________
(Please Print Name)
<PAGE>
Exhibit 10.5
CRITICAL PATH, INC.
1999 NONSTATUTORY STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Nonstatutory Stock
--------------------
Option 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 will be Nonstatutory Stock Options.
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 of the Plan.
(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 foreign country or jurisdiction where Options are, or will be, 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 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
------------
(g) "Company" means Critical Path, Inc., a California corporation.
-------
(h) "Consultant" means any person, including an advisor, engaged
----------
by the Company or a Parent or Subsidiary to render services to such entity.
<PAGE>
(i) "Director" means a member of the Board.
--------
(j) "Disability" means total and permanent disability as defined
----------
in Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers, 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. 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 SmallCap 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, the Fair Market Value of
a Share of Common Stock 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, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Notice of Grant" means a written or electronic notice
---------------
evidencing certain terms and conditions of an individual Option grant. The
Notice of Grant is part of the Option Agreement.
(o) "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.
(p) "Option" means a nonstatutory stock option granted pursuant to
------
the Plan, that is not intended to qualify as an incentive stock option within
the meaning of Section 422 of the Code and the regulations promulgated
thereunder.
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<PAGE>
(q) "Option Agreement" means an 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.
(r) "Option Exchange Program" means a program whereby outstanding
-----------------------
options are surrendered in exchange for options with a lower exercise price.
(s) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(t) "Optionee" means the holder of an outstanding Option granted
--------
under the Plan.
(u) "Parent" means a "parent corporation," whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
(v) "Plan" means this 1999 Nonstatutory Stock Option Plan.
----
(w) "Service Provider" means an Employee including an Officer,
----------------
Consultant or Director.
(x) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 12 of the Plan.
(y) "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 optioned and
sold under the Plan is 4,000,000 Shares. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option 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).
4. Administration of the Plan.
--------------------------
(a) Administration. The Plan shall be administered by (i) the
--------------
Board or (ii) a Committee, which committee shall be constituted to satisfy
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the Common Stock;
-3-
<PAGE>
(ii) to select the Service Providers to whom Options may be
granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options 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 the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(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 shall have declined since the date the Option was granted;
(viii) to institute an Option Exchange Program;
(ix) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(x) 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;
(xi) to modify or amend each Option (subject to Section
14(b) of the Plan), including the discretionary authority to extend the post-
termination exercisability period of Options longer than is otherwise provided
for in the Plan;
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option previously
granted by the Administrator;
(xiii) to determine the terms and restrictions applicable to
Options; and
(xiv) to make all other determinations deemed necessary or
advisable for administering the Plan.
-4-
<PAGE>
(c) Effect of Administrator's Decision. The Administrator's
----------------------------------
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.
5. Eligibility. Options may be granted to Service Providers except
-----------
Officers and Directors; provided, however, that Options may be granted to
Officers in connection with the Officer's initial employment by the Company.
6. Limitation. Neither the Plan nor any Option shall confer upon an
----------
Optionee any right with respect to continuing the Optionee's relationship as a
Service Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at any
time, with or without cause.
7. Term of Plan. The Plan shall become effective upon its adoption
------------
by the Board. It shall continue in effect for ten (10) years, unless sooner
terminated under Section 14 of the Plan.
8. Term of Option. The term of each Option shall be stated in the
--------------
Option Agreement.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per share exercise price for the Shares
--------------
to be issued pursuant to exercise of an Option shall be determined by the
Administrator.
(b) Waiting Period and Exercise Dates. At the time an Option is
---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) 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 (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
-5-
<PAGE>
(vi) a reduction in the amount of any Company liability to
the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws; or
(viii) any combination of the foregoing methods of payment.
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. 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 Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will 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.
Exercising an Option in any manner shall decrease 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 to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option, but only within such
period of time as is specified in the Option Agreement, and only 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 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 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
-6-
<PAGE>
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, 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 (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of
death. 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 his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. 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 conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
11. Non-Transferability of Options. Unless determined otherwise by
------------------------------
the Administrator, an Option 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. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.
12. Adjustments Upon Changes in Capitalization, Dissolution, 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, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but
-7-
<PAGE>
as to which no Options have yet been granted or which have been returned to the
Plan upon cancellation or expiration of an Option, as well as the price per
share of Common Stock covered by each such outstanding Option, 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; provided, however, that
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.
(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 until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option 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 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 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 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, the Optionee shall fully vest in and
have the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an
Option 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 shall be fully
vested and exercisable for a period of fifteen (15) days from the date of such
notice, and the Option shall terminate upon the expiration of such period. For
the purposes of this paragraph, the Option 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, 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
-8-
<PAGE>
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option, for each Share
of Optioned Stock 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. Date of Grant. The date of grant of an Option shall be, for all
-------------
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee 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) 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 Company 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.
17. Reservation of Shares. The Company, during the term of this
---------------------
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
-9-
<PAGE>
CRITICAL PATH, INC.
1999 NONSTATUTORY STOCK OPTION PLAN
STOCK OPTION AGREEMENT
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]
You have 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 Shares Granted _____________________________
Total Exercise Price $____________________________
Type of Option: Nonstatutory Stock Option
Term/Expiration Date: _____________________________
Vesting Schedule:
----------------
Subject to the Optionee continuing to be a Service Provider on such dates,
this Option shall vest and become exercisable in accordance with the following
schedule:
[25% of the Shares subject to the Option shall vest twelve months after the
Vesting Commencement Date, and 1/48th of the Shares subject to the Option shall
vest upon the last day of each month thereafter.]
Termination Period:
------------------
This Option may be exercised for 30 days after Optionee ceases to be a
Service Provider. Upon the death or Disability of the Optionee, this Option may
be exercised for 6 months following
<PAGE>
the date of death or Disability of the Optionee. In no event shall this Option
be exercised later than 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 attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. In the event
of a conflict between the terms and conditions of the Plan and the terms and
conditions of this Option Agreement, the terms and conditions of the Plan shall
prevail.
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is 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 in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to the Manager of Stock Compliance and Equity
Compensation. 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 such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
3. 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 the Company's initial public offering. The Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such Market Standoff Period.
<PAGE>
4. 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;
(b) check;
(c) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or
(d) 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.
5. 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 the Optionee. The
terms of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
6. 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 Agreement.
7. Tax Consequences. Some of the federal tax consequences relating to
----------------
this Option, as of the date of this Option, are set forth below. THIS SUMMARY
IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THIS OPTION
OR DISPOSING OF THE SHARES.
(a) Exercising the Option. The Optionee may incur regular federal
---------------------
income tax liability upon exercise of an NSO. 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 Exercised Shares on the
date of exercise over their aggregate Exercise Price. If the Optionee is an
Employee or a former Employee, the Company will be required to withhold from his
or her 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.
(b) Disposition of Shares. If the Optionee holds NSO Shares 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.
<PAGE>
8. Entire Agreement; Governing Law. 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. This agreement is governed by the internal substantive laws, but not
the choice of law rules, of California.
9. 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 (AND NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING 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 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.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE CRITICAL PATH, INC.
- ------------------------------ -----------------------------
Signature By
- ------------------------------ -----------------------------
Print Name Title
- ------------------------------
Residence Address
- ------------------------------
<PAGE>
EXHIBIT A
---------
CRITICAL PATH, INC.
1999 NONSTATUTORY STOCK OPTION PLAN
EXERCISE NOTICE
Critical Path, Inc.
320 First Street
San Francisco, CA 94105
Attention: Manager, Stock Compliance and Equity Compensation
1. Exercise of Option. Effective as of today, ________________, _____,
------------------
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Critical Path, Inc. (the "Company") under
and pursuant to the 1999 Nonstatutory Stock Option Plan (the "Plan") and the
Stock Option Agreement dated ______, ___ , Grant Number _______ (the "Option
Agreement"). The purchase price for the Shares shall be $_______, as required
by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
----------------------------
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 (as evidenced by the
---------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, 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 so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will 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.
<PAGE>
5. Tax Consultation. Purchaser understands that Purchaser may suffer
----------------
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
-------------------------------
incorporated herein by reference. This Agreement, the Plan and the 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 Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.
Submitted by: Accepted by:
PURCHASER CRITICAL PATH, INC.
- ----------------------------- -----------------------------
Signature By
- ----------------------------- -----------------------------
Print Name Title
----------------------------
Date Received
Address: Address: 320 First Street
- ------- --------------------- -------
San Francisco, CA 94105
---------------------
---------------------
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation by reference in this Registration Statement on
Form S-8 of our report dated January 28, 1999, except as to the subsequent
events described in Note 9 which is as of March 26, 1999, relating to the
financial statements, which appears in the Registration Statement of Critical
Path, Inc. on Form S-1 dated June 1, 1999.
/s/ PricewaterhouseCoopers LLP
San Jose, California
September 17, 1999
<PAGE>
Exhibit 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
--------------------------------------------------
We consent to the use of our report dated November 6, 1998, with respect to the
financial statements of FABRIK Communications, Inc. Included in the prospectus
of Critical Path, Inc. dated June 1, 1999 and incorporated by reference in the
Registration Statement (Form S-8) of Critical Path Inc. Pertaining to the 1996
Amplitude Stock Option Plan, 1998 Stock Option Plan, 1998 dotOne Stock Option
Plan, 1999 Employee Stock Purchase Plan and the 1999 Nonstatutory Stock Option
Plan for the registration of shares of its common stock.
/s/ Ernst & Young LLP
Palo Alto, California
September 17, 1999
