<PAGE> 1
As filed with the Securities and Exchange Commission on February 1, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CRITICAL PATH, INC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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320 FIRST STREET
CALIFORNIA SAN FRANCISCO, CALIFORNIA 94105
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(STATE OF INCORPORATION) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
1996 FAXNET STOCK OPTION PLAN
1997 XETI STOCK OPTION PLAN
1998 STOCK OPTION PLAN
(FULL TITLE OF THE PLANS)
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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)
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Copies to:
Alan K. Austin, Esq.
Mark L. Reinstra, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
(650) 493-9300
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM MAXIMUM
AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE OFFERING PRICE REGISTRATION FEE
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<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 FaxNet Stock Option Plan ............ 489,131 shares $ 22.63(2) $ 11,066,979.16 $ 2,921.68
to be issued upon exercise of options
granted and outstanding and options
authorized and unissued under the
1997 Xeti Stock Option Plan .............. 108,643 shares $ 40.69(3) $ 78,749.00 $ 1,167.14
to be issued upon exercise of options
authorized and unissued under the 1998
Stock Option Plan ........................ 7,500,000 shares $ 66.56(4) $ 499,200,000.00 $ 131,788.80
TOTAL ................................... 8,097,774 shares $ 514,687,970.13 $ 135,877.62
==================================================================================================================================
</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(b) and 457(c) under the Securities
Act of 1933. Such computation is based on the weighted average exercise
price of $22.63 per share covering 362,211 outstanding options and the
estimated exercise price of $66.56 per share covering 126,920 authorized
but unissued shares. The estimated exercise price of $66.56 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 January 28, 2000.
(3) Computed in accordance with Rules 457(b) and 457(c) under the Securities
Act of 1933. Such computation is based on the weighted average exercise
price of $40.69 per share covering 43,405 outstanding options and the
estimated exercise price of $66.65 per share covering 65,238 authorized
but unissued shares. The estimated exercise price of $66.56 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 January 28, 2000.
(4) Estimated in accordance with Rule 457(b) 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 January 28, 2000,
which average is $66.56.
<PAGE> 2
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 Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1999;
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1999;
(c) Prospectus of the Registrant, dated June 1, 1999;
(d) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1999;
(e) 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.
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.
<PAGE> 3
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
<S> <C>
5.1 Opinion of Wilson Sonsini Goodrich & Rosati.
10.1 1996 FaxNet Stock Option Plan
10.2 1997 Xeti Stock Option Plan
10.3* 1998 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>
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* 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.
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
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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.
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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 January 31,
2000.
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
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<S> <C> <C>
President and Chief Executive
/s/ DOUGLAS T. HICKEY Officer and Director (Principal January 31, 2000
- ------------------------------------- Executive Officer)
Douglas T. Hickey
/s/ DAVID THATCHER Executive Vice President and Chief
- ------------------------------------- Financial Officer (Principal January 31, 2000
David Thatcher Financial and Accounting Officer)
/s/ DAVID C. HAYDEN Chairman of the Board January 31, 2000
- -------------------------------------
David C. Hayden
/s/ CHRISTOS M. COTSAKOS Director January 31, 2000
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Christos M. Cotsakos
Director
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Lisa Gansky
/s/ KEVIN R. HARVEY Director January 31, 2000
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Kevin R. Harvey
/s/ JAMES A. SMITH Director January 31, 2000
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James A. Smith
/s/ GEORGE ZACHARY Director January 31, 2000
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George Zachary
</TABLE>
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
5.1 Opinion of Wilson Sonsini Goodrich & Rosati
10.1 1996 FaxNet Stock Option Plan
10.2 1997 Xeti Stock Option Plan
10.3* 1998 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>
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* 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.
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EXHIBIT 5.1
[Letterhead of Wilson Sonsini Goodrich & Rosati]
February 1, 2000
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 February 1, 2000 (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of an aggregate of 8,097,774 shares of
Common Stock, par value $0.001 (the "Shares"), both issued and outstanding and
unissued and reserved for issuance pursuant to the 1996 FaxNet Stock Option
Plan, the 1997 Xeti Stock Option Plan and the 1998 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
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<PAGE> 1
EXHIBIT 10.1
FAXNET CORPORATION
1996 EMPLOYEE AND CONSULTANT STOCK OPTION PLAN
1. Purpose.
The purpose of this plan (the "Plan") is to secure for FaxNet
Corporation (the "Company") and its shareholders the benefits arising from
capital stock ownership by key employees of and consultants to the Company and
its parent and subsidiary corporations who are expected to contribute to the
Company's future growth and success. Except where the context otherwise
requires, the term "Company" shall include the parent and all subsidiaries of
the Company, as defined in Sections 424(e) and 424(f) of the Internal Revenue
Code of 1986, as amended (the H Code").
2. Type of Options and Administration.
(a) Types of Options. Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors of the Company (or a Committee
designated by the Board of Directors) and may be either incentive stock options
("Incentive Stock Options") meeting the requirements of Section 422 of the Code
or nonstatutory options which are not intended to meet the requirements of
Section 422 of the Code.
(b) Administration. The Plan will be administered by the Board of
Directors of the Company, whose construction and interpretation of the terms and
provisions of the Plan shall be final and conclusive. The Board of Directors may
in its sole discretion grant options to purchase shares of the Company's Common
Stock and issue shares upon exercise of such options as provided in the Plan.
The Board shall have authority, subject to the express provisions of the Plan,
to construe the respective option agreements and the Plan, to prescribe, amend
and rescind rules and regulations relating to the Plan, to determine the terms
and ,provisions of the respective option agreements, which need not be
identical, and to make all other determinations in the judgment of the Board of
Directors necessary or desirable for the administration of the Plan. The Board
of Directors may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option agreement in the manner and to the
extent it shall deem expedient to carry the Plan into effect and it shall be the
sole and final judge of such expediency. No director shall be liable for any
action or determination made in good faith. The Board of Directors may to the
full extent permitted by law, delegate any or all of its powers under the Plan
to a committee (the "Committee") appointed by the Board of Directors, and if the
Committee is so appointed all references to the Board of Directors in the Plan
shall mean and relate to such Committee.
3. Eligibility.
(a) Incentive Stock Options. Incentive Stock Options shall be granted
only to persons who are, at the time of grant, employees (including officers and
directors who are employees) of the Company. No person shall be granted any
Incentive Stock Option under the Plan who, at the time such option is granted,
owns, directly or indirectly, stock possessing more than 101 of the total
combined voting power of all classes of stock of the Company, unless the
requirements of paragraph. (b) of Section 11 are satisfied. The attribution of
stock ownership provisions of Section 424(d) of the Code, and any successor
provisions thereto, shall be applied in determining the shares of stock owned by
a person for purposes of applying the foregoing
<PAGE> 2
percentage limitation. A person who has been granted an option may, if he or she
is otherwise eligible, be granted an additional option or options if the Board
of Directors shall so determine.
(b) Nonstatutory Options. Nonstatutory options shall be granted only to
persons who are, at the time of grant, employees (including officers and
directors who are employees) or directors of or consultants to the Company. A
person who has been granted an option nay, if he or she is otherwise eligible,
be granted an additional option or options if the Board of Directors shall so
determine.
(c) Grant of Options to Officers and Directors. From and after the
registration of the Common Stock of the Company under Section 12 of the
Securities Exchange Act of 1934 (the "Exchange Act"), the selection of an
officer or director as a participant in the plan and the timing, price and
number of shares for which an option or options may be granted to such officer
or director shall be determined either (i) by the Board of Directors, if all of
the directors shall be "disinterested persons" (as hereinafter defined) or (ii)
by, or only in accordance with, the recommendations of a committee of two or
more persons having full authority to act in the matter, of which all members
shall be "disinterested persons." For the purposes of the Plan, a director or
member of such committee shall be deemed to be "disinterested" only if such
person qualifies as a "disinterested person" within the meaning of paragraph (c)
(2) of We 16b-3 under the Exchange Act (or any successor rule), as such term is
interpreted from time to time.
4. Stock Subject to Plan.
Subject to adjustment as provided in Section 15 below, the maximum
number of shares of Common Stock of the Company which nay be issued and sold
under the Plan is 769,226 shares, provided that (i) upon the issuance and sale
of 125 additional shares of Series B Convertible Preferred Stock for an
aggregate purchase price of $125, 000, an additional 13, 112 shares shall be
authorized to be issued and sold under the Plan and (ii) upon the issuance and
sale of 1,000 shares of Series C Convertible Preferred Stock for an aggregate
purchase price of $1, 000, 000, an additional 90,427 shares shall be authorized
to be issued and sold under the Plan, all of which shares may be issued and sold
pursuant to Incentive Stock Options granted under the Plan or pursuant to
nonstatutory options under the Plan. Such shares may be authorized and unissued
shares or may be shares issued and thereafter acquired by the Company. If an
option granted under the Plan shall expire or terminate for any reason without
having been exercised in full, the unpurchased shares subject to such Option
shall again be available for subsequent option grants under the Plan.
5. Forms of Option Agreements.
As a condition to the grant of an option under the Plan, each recipient
of an option shall execute an option agreement in such form not inconsistent
with the Plan as may be specified by the Board of Directors. Each option
agreement shall state whether the options granted thereby are Incentive Stock
Options or nonstatutory options.
6. Purchase Price.
(a) General. The purchase price per share of stock deliverable upon the
exercise of an option shall be determined by the Board of Directors, provided,
however, that (i) in the case of an Incentive Stock Option, the exercise price
shall not be less than 1001 of the fair market value of such stock, as
determined by the Board of Directors, at the time of grant of such option, or
less than 110t of such fair market value in the case of options described in
paragraph (b) of Section 11, and (ii) in the case of a nonstatutory option, the
exercise price shall be determined in the sole discretion of the Board of
Directors, at the time of grant of such option.
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<PAGE> 3
(b) Payment of Purchase Price. Options granted under the Plan may
provide for the payment of the exercise price by delivery of cash or a check to
the order of the Company in an amount equal to the exercise price of such
options, or, to the extent provided in the applicable option agreement, by
delivery to the Company of shares of Cannon Stock of the Company already owned
by the optionee having a fair market value equal in amount to the exercise price
of the options being exercised, or by any combination of such methods of
payment. The fair market value of any shares of the Company's Common Stock which
nay be delivered upon exercise of an option shall be determined in accordance
with the terms of the applicable option agreement.
7. Option Period.
Each option and all rights thereunder shall expire on such date as the
Board of Directors shall determine, but, in the case of Incentive Stock Options,
in no event after the expiration of ten years from the day on which the option
is granted (or five years in the case of options described in paragraph (b) of
Section 11) and, in the case of nonstatutory options, in no event after the
expiration of ten years plus 30 days from the day on which the option is
granted, and in either case, shall be subject to earlier termination as provided
in the Plan.
8. Exercise of Options.
Each option granted under the Plan shall be exercisable either in full
or in installments at such time or times and during such period as shall be set
forth in the agreement evidencing such option, subject to the provisions of
Section 7 above.
9. Nontransferability of Options.
No option granted under the Plan shall be assignable or transferable by
the person to whom it is granted, either voluntarily or by operation of law,
except by will or the laws of descent: and distribution or pursuant to a
qualified domestic relations order (as defined in the Code) or Title I of the
Employee Retirement Income Security Act, or the rules thereunder. During the
life of the optionee, the option shall be exercisable only by such person.
10. Effect of Termination of Employment.
No incentive stock option may be exercised unless, at the time of such
exercise, the optionee is, and has been continuously since the date of grant of
his or her option, employed by the Company, except that if and to the extent the
option agreement or instrument so provides:
(a) the option may be exercised within the period of three months
after the date the optionee ceases to be an employee of the
Company (or within such lesser period as may be specified in the
applicable option agreement);
(b) if the optionee dies while in the employ of the Company, or
within three months after the optionee ceases to be such an
employee, the option may be exercised by the person to whom it is
transferred by will or the laws of descent and distribution
within the period of one year after the date of death (or within
such lesser period as may be specified in the applicable option
agreement); and
(c) if the optionee becomes disabled (within the meaning of Section
22(e)(3) of the Code or any successor provision thereto) while in
the employ of the Company, the option may be exercised within the
period of one year after the date the optionee ceases to be such
an
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<PAGE> 4
employee because of such disability (or within such lesser period
as may be specified in the applicable option agreement);
provided, however, that in no event may any option be exercised after the
expiration date of the option. For all purposes of the Plan and any option
granted hereunder, "employment" shall be defined in accordance with the
provisions of Section 1.421-7(h) of the Income Tax Regulations (or any successor
regulations).
11. Incentive Stock Options.
Options granted under the Plan which are intended to be Incentive Stock
Options shall be specifically designated as Incentive Stock Options and shall be
subject to the following additional terms and conditions:
(a) Dollar Limitation. If Incentive Stock Options granted to any
employee under the Plan (and any other incentive stock option plans of the
Company), in the aggregate, become exercisable for the first time in any one
calendar year for shares of Common Stock with an aggregate fair market value
(determined as of the respective date or dates of grant) of more than $100,000,
then, to the extent required under the Code, the option to acquire such excess
shall be treated as a nonstatutory option.
(b) 10% Shareholder. If any employee to whom an Incentive Stock Option
is to be granted under the Plan is, at the time of the `grant of such option,
the owner of stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company (after taking into account the
attribution of stock ownership rules of Section 424 (d) of the Code) , then, to
the extent required under the Code, the option shall be treated as a
nonstatutory option unless the following special provisions are applicable to
the option granted to such individual:
(i) The purchase price per share of the Common Stock
subject to such Incentive Stock Option shall not be less than 110% of the fair
market value of one share of Common Stock at the time of grant; and
(ii) The option exercise period shall not exceed five
years from the date of grant.
12. Additional Provisions.
(a) Additional Option Provisions. The Board of Directors may, in its
sole discretion, include additional provisions in any option granted under the
Plan, including without limitation restrictions on transfer, repurchase rights,
commitments to pay cash bonuses, make or arrange for loans or transfer other
property to optionees upon exercise of options, or such other provisions as
shall be determined by the Board of Directors; provided that such additional
provisions shall not be inconsistent with any other term or condition of the
Plan and such additional provisions shall not cause any Incentive Stock Option
granted under the Plan to fail to qualify as an Incentive Stock Option within
the meaning of Section 422 of the Code.
(b) Acceleration. The Board of Directors may, in its sole discretion,
accelerate the date or dates on which all or any particular option or options
granted under the Plan may be exercised.
13. General Restrictions.
(a) Investment Representations. The Company may require any person to
whom an option is granted, as a condition of exercising such option, to give
written assurances in substance and form satisfactory to the Company to the
effect that such person is acquiring the Common Stock subject to the option for
his or her own account for investment and not with any present intention of
selling or otherwise distributing the
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<PAGE> 5
same, and to such other effects as the Company deems necessary or appropriate in
order to comply with federal and applicable state securities laws.
(b) Compliance With Securities Laws. Each option shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, is necessary as a condition
of, or in connection with, the issuance or purchase of shares thereunder, such
option may not be exercised, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions acceptable to the Board of Directors. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
14. Rights as a Shareholder.
The holder of an option shall have no rights as a shareholder with
respect to any shares covered by the option until the date of issue of a stock
certificate to him or her for such shares. Except as provided below in Section
15, no adjustment shall be made for dividends or other rights f or which the
record date is prior to the date such stock certificate is issued.
15. Adjustments.
(a) General. If, as a result of a merger, consolidation, sale of all or
substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other distribution with respect to the outstanding shares of Common
Stock or other securities, the outstanding shares of Common Stock are increased
or decreased, or are exchanged for a different number or kind of shares or other
securities, or additional shares or new or different shares or other securities
are distributed with respect to such shares of Common Stock or other securities,
an appropriate and proportionate adjustment may be made in (i) the maximum
number and kind of shares reserved for issuance under the Plan, (ii) the number
and kind of shares or other securities subject to then outstanding options under
the Plan, and (ii) the price for each share subject to any then outstanding
options under the Plan, without changing the aggregate purchase price as to
which such options remain exercisable.
(b) Board Authority to Make Adjustments. Adjustments under this Section
15 will be made by the Board of Directors, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final, binding
and conclusive. No fractional shares will be issued under the Plan on account of
any such adjustments.
16. Reorganization.
(a) General. In the event of a consolidation or merger in which the
Company is not the surviving corporation, or which results in the acquisition of
substantially all of the Company's outstanding Common Stock by a single person,
entity or group of persons or entities acting in concert, or in the event of the
sale or transfer of all or substantially all of the assets of the Company, or in
the event of a reorganization or liquidation of the Company, the Board of
Directors of the Company, or the board of directors (of any corporation assuming
the obligations of the Company, shall, as to outstanding options, either (i)
provide that such options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), provided that any such options substituted for Incentive Stock Options
shall meet the requirements of Section 424(a) of the Code, (ii) upon written
notice to the optionees, provide that all unexercised options will terminate
immediately prior to the consummation of such merger, consolidation,
acquisition, reorganization, liquidation, sale or transfer unless exercised by
the optionee within a specified number of days following the date of such
notice, or (iii) in the event of a merger under the terms
-5-
<PAGE> 6
of which holders of the Common Stock of the Company will receive upon
consummation thereof a cash payment for each share surrendered in the merger
(the "Merger Price"), make or provide for a cash payment to the optionees equal
to the difference between (A) the Merger Price times the number of shares of
Common Stock subject to such outstanding options (to the extent exercisable) and
(B) the aggregate exercise price of all such outstanding options in exchange for
the termination of such options. In any such case, the Board of Directors may,
in its discretion, advance the lapse of any waiting or installment periods and
exercise dates.
(b) Substitute Options. The Company may grant options under the Plan in
substitution for options held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in the circumstances.
17. No Special Employment Rights.
Nothing contained in the Plan or in any option shall confer upon. any
optionee any right with respect to the continuation of his or her employment by
the Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation of the
optionee. Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall be
determined at the time of such absence in accordance with the provisions of
Section 1.421-7(h) of the Income Tax Regulations (or any successor regulations).
18. Other Employee Benefits.
The amount of any compensation deemed to be received by an employee as a
result of the exercise of an option or the sale of shares received upon such
exercise will not constitute compensation with respect to which any other
employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
19. Amendment of the Plan.
The Board of Directors may at any time, and from time to time, modify or
amend the Plan in any respect, except that without the approval of the
shareholders of the Company the Board of Directors may not (a) materially
increase the benefits accruing to individuals who participate in the Plan, (b)
increase the maximum number of shares which may be issued under the Plan (except
for adjustments specifically provided in the Plan), or (c) materially modify the
requirements as to eligibility for participation in the Plan. The termination or
any modification or amendment of the Plan shall not, without the consent of an
optionee, affect his or her rights under an option previously granted to him or
her. With the consent of the optionee affected, the Board of Directors may amend
outstanding Option agreements in a manner not inconsistent with the Plan. The
Board of Directors shall have the right to amend or modify the terms and
provisions of the Plan and of any outstanding Incentive Stock Options granted
under the Plan to the extent necessary to qualify any or all such options for
such favorable federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded incentive stock options under Section 422 of the
Code.
20. Withholding.
(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of Options under the Plan. Subject to the prior approval of the Company, which
may be
-6-
<PAGE> 7
withheld by the Company in its sole discretion, the optionee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option, (ii) by delivering to the Company shares of Common Stock already
owned by the optionee, or (ii) by delivering cash. The shares so delivered or
withheld shall have a fair market value equal to such withholding obligation.
The fair market value of the shares used to satisfy such withholding obligation
shall be determined by the Company as of the date that the amount of tax to be
withheld is to be determined. An optionee who has made an election pursuant to
this Section 20(a) may only satisfy his or her withholding obligation with
shares of Common Stock which are not subject to any repurchase, forfeiture,
unfulfilled vesting or other similar requirements.
(b) Notwithstanding the foregoing, in the case of an optionee subject to
the reporting requirements of Section 16(a) of the Exchange Act, no election to
use shares for the payment of withholding taxes shall be effective unless made
in compliance with any applicable requirements of sale 16b-3 (e) or any
successor rule under such Act.
21. Cancellation and New Grant of Options.
The Board of Directors shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock having an option exercise price per
share which may be lower or higher than the exercise price per share of the
cancelled options.
22. Effective Date and Duration of the Plan.
(a) Effective Date. The Plan shall became effective when adopted by the
Board of Directors, but no Incentive Stock Option granted under the Plan shall
become exercisable unless and until the Plan shall have been approved by the
Company's shareholders. If such shareholder approval is not obtained within
twelve months before or after the date of the Board's adoption of the Plan, any
Incentive Stock Options previously granted under the Plan shall terminate and no
further Incentive Stock Options shall be granted. Amendments to the Plan not
requiring shareholder approval shall become effective when adopted by the Board
of Directors; amendments requiring shareholder approval (as provided in Section
19) shall become effective when adopted by the Board of Directors, but no
Incentive Stock Option issued after the date of such amendment shall became
exercisable (to the extent that such amendment to the Plan was required to
enable the Company to grant such Incentive Stock Option to a particular
optionee) unless and until such amendment shall have been approved by the
Company's shareholders. If such shareholder approval is not obtained within
twelve months of the Board's adoption of such amendment any Incentive Stock
Options granted on or after the date of such amendment shall terminate to the
extent that: such amendment to the Plan was required to enable the Company, to
grant such option to a particular optionee. Subject to this limitation, options
may, be granted under the Plan at any time after the effective date and before
the date fixed for termination of the Plan.
(b) Termination. The Plan shall terminate upon the earlier of (i) the
close of business on the day next preceding the tenth anniversary of the date of
its adoption by the Board of Directors (or approval by shareholders, if earlier)
, or (ii) the date con which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise or cancellation of options
granted under the Plan. If the date of termination is determined under (i)
above, then options outstanding on such date shall continue to have force and
effect in accordance with the provisions of the instruments evidencing such
options.
Adopted by the Board of Directors on February __, 1996
-7-
<PAGE> 8
EXHIBIT A
FAXNET CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
1. Grant of Option. FaxNet Corporation, a Delaware corporation (the
"Company"), hereby grants to ____________________ (the "Employee"), an option,
pursuant to the Company's 1996 Employee and Consultant Stock Option Plan (the
"Plan") , to purchase an aggregate of __________shares of Common Stock, $0.01
par value ("Common Stock"), of the Company at a price of $_____ per share,
purchasable as set forth in and subject to the terms and conditions of this
option and the Plan. Except where the context otherwise requires, the term
"Company" shall include the parent and all subsidiaries of the Company as
defined in Sections 424(e) and 424(f) of the Internal. Revenue Code of 1986, as
amended (the "Code").
2. Incentive Stock Option. This option is intended to qualify as an
incentive stock option ("Incentive Stock Option") within the meaning of Section
422 of the Code.
3. Exercise of Option and Provisions for Termination.
(a) Vesting Schedule. Except as otherwise provided in this
Agreement, this option may be exercised prior to the tenth anniversary of the
date of grant (or five years in the case of an option described in paragraph (b)
of Section 11 of the Plan) (hereinafter the "Expiration Date") in installments
as to not more than the number of shares and during the respective installment
periods set forth in the table below. The right of exercise shall be cumulative
so that if the option is not exercised to the maximum extent permissible during
any exercise period it shall be exercisable, in whole or in part, with respect
to all shares not so purchased at any time prior to the Expiration Date or the
earlier termination of this option.
<TABLE>
<CAPTION>
Total No. of
Exercise Period Shares Exercisable
--------------- ------------------
<S> <C>
Prior to _____________, 19___ -0-
On or after __________, 19___ __________
but prior to _________, 19___
On or after __________, 19___ __________
but prior to _________, 19___
On or after __________, 19___ __________
but prior to _________, 19___
On or after __________, 19___ __________
</TABLE>
This option may not be exercised at any time on or after the Expiration Date.
(b) Exercise Procedure. Subject to the conditions set forth in
this Agreement, this option shall be exercised by the Employee's delivery of
written notice of exercise to the Treasurer of the Company, specifying the
number of shares to be purchased and the purchase price to be paid therefor and
accompanied
-8-
<PAGE> 9
by payment in full in accordance with Section 4. Such exercise shall be
effective upon receipt by, the Treasurer of the Company of such written notice
together with the required payment. The Employee may purchase less than the
number of shares covered hereby, provided that no partial exercise of this
option may be for any fractional share or for fewer than ten whole shares.
(c) Except: as otherwise provided in this Section 3, this option
may not be exercised unless the Employee, at the time he or she exercises this
option, is, and has been at all times since the date of grant of this option, an
employee of the Company. For all purposes of this option, (i) "employment" shall
be defined in accordance with the provisions of Section 1.421-7(h) of the Income
Tax Regulations or any successor regulations, and (ii) if this option shall be
assumed or a new option substituted therefor in a transaction to which Section
424 (a) of the Code applies, employment by such assuming or substituting
corporation (hereinafter called the "Successor Corporation") shall be considered
for all purposes of this option to be employment by the Company.
(d) Exercise Period loon Termination of Employment. If the
Employee ceases to be employed by the Company for any reason other than death or
disability or a discharge for "cause," as provided below, the right to exercise
this option shall terminate three months after such cessation (but in no event
after the Expiration Date), provided that this option shall be exercisable only
to the extent that the Employee was entitled to exercise this option on the date
of such cessation.
(e) Exercise Period Upon Death or Disability. If the Employee
dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code or
any successor provision thereto) prior to the Expiration Date while he or she is
an employee of the Company, or if the Employee dies within three months after
the Employee ceases to be an employee of the Company (other than as the result
of a discharge for "cause" as specified in paragraph (f) below), this option
shall be exercisable, within the period of one year following the date of death
or disability of the Employee (but in no event after the Expiration Date), by
the Employee or by the person to whom this option is transferred by will or the
laws of descent: and distribution or pursuant to a qualified domestic relations
order (as defined in the Code) or Title I of the Employee Retirement Income
Security Act, or the rules thereunder, provided that this option shall be
exercisable only to the extent that this option was exercisable by the Employee
on the date of his or her death or disability Except as otherwise indicated by
the context, the term "Employee, " as used in this option, shall be deemed to
include the estate of the Employee or any person who acquires the right to
exercise this option by bequest or inheritance or otherwise by reason of the
death of the Employee or pursuant to a qualified domestic relations order (as
defined in the Code) or Title I of the Employee Retirement Income Security Act,
or the rules thereunder.
(f) Discharge for Cause. If the Employee, prior to the Expiration
Date, ceases his or her employment with the Company because he or she is
discharged for "cause" (as defined below) , the right to exercise this Option
shall terminate immediately upon such cessation of employment. "Cause" shall
mean willful misconduct in connection with the Employee's employment or willful
failure to perform his or her employment responsibilities in the best interests
of the Company (including, without limitation, breach by the Employee of any
provision of any employment, nondisclosure, non-competition or other similar
agreement between the Employee and the Company) , as determined by the Company,
which determination shall be conclusive.
4. Payment of Purchase Price.
(a) Method of Payment. Payment of the purchase price for shares
purchased upon exercise of this option shall be made by delivery to the Company
of cash or a check to the order of the Company in an amount equal to the
purchase price of: such shares, or by delivery to the Company of shares
-9-
<PAGE> 10
of Common Stock of the Company then owned by the Employee having a fair market
value equal in amount to the purchase price of such shares, or by any
combination of such methods of payment.
(b) Valuation of Shares Tendered in Payment of Purchase Price.
For the purposes hereof, the fair market value of any share of the Company's
Common Stock which may be delivered to the Company in exercise of this option
shall be determined in good faith by the Board of Directors of the Company.
(c) Delivery of Shares Tendered in Payment of Purchase Price. If
the Employee exercises options by delivery of shares of Common Stock of the
Company, the certificate or certificates representing the shares of Common Stock
of the Company to be delivered shall be duly executed in blank by the Employee
or shall be accompanied by a stock power duly executed in blank suitable for
purposes of transferring such shares to the Company. Fractional shares of Common
Stock of the Company will not be accepted in payment of the purchase price of
shares acquired upon exercise of this option.
(d) Restrictions on Use of Option Stock. Notwithstanding the
foregoing, no shares of Common Stock of the Company nay be tendered in payment
of the purchase price of shares purchased upon exercise of this option if the
shares to be so tendered were acquired within twelve (12) months before the date
of such tender, through the exercise of an option granted under the Plan or any
other stock option or restricted stock plan of the Company.
5. Delivery of Shares; Compliance With Securities Laws, Etc.
(a) General. The Company shall, upon payment of the option price
for the number. of shares purchased and paid for, make prompt delivery of such
shares to the Employee, provided that if any law or regulation requires the
Company to take any action with respect to such shares before the issuance
thereof, then the date of delivery of such shares shall be extended for the
period necessary to complete such action.
(b) Listing, Qualification, Etc. This option shall be subject to
the requirement that if, at any time, counsel to the Company shall determine
that the listing, registration or qualification of the share, subject hereto
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, is necessary as a condition
of, or in connection with, the issuance or purchase of shares hereunder, this
option may not be exercised, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions acceptable to the Board of Directors. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
6. Nontransferability of Option. Except as provided in paragraph (e) of
Section 3, this option is personal and no rights granted hereunder may be
transferred, assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise) nor shall any such rights be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this option or of such rights contrary to
the provisions hereof, or upon the levy of any attachment or similar process
upon this option or such rights, this option and such rights shall, at the
election of the Company, become null and void.
7. No Special Employment Rights. Nothing contained in the Plan or this
option shall be construed or deemed by any person under any circumstances to
bind the Company to continue the employment of the Employee for the period
within which this option may be exercised. However, during the period of the
Employee's employment, the Employee shall render diligently and faithfully the
services which are assigned to the Employee from time to time by the Board of
Directors or by the executive officers of the
-10-
<PAGE> 11
Company and shall at no time take any action which, directly or indirectly,
would be inconsistent with the best interests of the Company.
8. Rights as a Shareholder. The Employee shall have no rights as a
shareholder with respect to any shares which may be purchased by exercise of
this option unless and until a certificate representing such shares is duly
issued and delivered to the Employee. No adjustment shall be made for dividends
or other rights for which the record date is prior to the date such stock
certificate is issued.
9. Adjustments.
(a) General If, as a result of a merger, consolidation, sale of
all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other distribution with respect to the outstanding shares of Common
Stock or other securities, the outstanding shares of Common Stock are increased
or decreased, or are exchanged for a different number or kind of shares or other
securities, or additional shares or new or different shares or other securities
are distributed with respect to such shares of Common Stock or other securities,
an appropriate and proportionate adjustment no, be made in Q) the number and
kind of shares or other securities subject to this option and (ii) the price for
each share subject to this option, without changing the aggregate purchase price
as to which this option remains exercisable.
(b) Board Authority to Make Adjustments. Adjustments under this
Section 9 will be made by the Board of Directors, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final, binding
and conclusive. No fractional shares will be issued pursuant to this option on
account of any such adjustments.
(c) Limits on Adjustments. No adjustment shall be made under this
Section 9 which would, within the meaning of any applicable provision of the
Code, constitute a modification, extension or renewal of this option or a grant
of additional benefits to the Employee.
10. Mergers, Etc.
(a) General. In the event of a consolidation or merger in which
the Company is not the surviving corporation, or which results in the
acquisition of substantially all of the Company's outstanding Common Stock by a
single person, entity or group of persons or entities acting in concert, or in
the event of the sale or transfer of all or substantially all of the assets of
the Company, or in the event of a reorganization or liquidation of the Company,
prior to the Expiration Date or termination of this option (each, an "Organic
Event") , the Employee shall, with respect to this option or any unexercised
portion hereof, be entitled to the rights and benefits, and be subject to the
limitations, set forth in Section 16 of the Plan.
(b) Acceleration. In the event of the occurrence of an Organic
Event after the first anniversary of the date hereof, the vesting schedule set
forth in Section 3 (a) of this Agreement may be accelerated in whole or in part
at the sole discretion of the Board of Directors of the Company.
11. Withholding Taxes. The Company's obligation to deliver shares upon
the exercise of this option shall be subject to the Employee's satisfaction of
all applicable federal, state and local income and employment tax withholding
requirements.
12. Limitations on Disposition of Incentive Stock Option Shares. It is
understood and intended that this option shall qualify as an "incentive stock
option" as defined in Section 422 of the Code. Accordingly, the Employee
understands that in order to obtain the benefits of an incentive stock option
under Section 421 of the Code, no sale or other disposition may be made of any
shares acquired upon exercise of the
-11-
<PAGE> 12
option within one year after the day of the transfer of such shares to him, nor
within two years after the grant of the option. If the Employee intends to
dispose, or does dispose (whether by sale, exchange, gift, transfer or
otherwise), of any such shares within said periods, he or she will notify the
Company in writing within ten days after such disposition.
13. Investment Representations; Legend.
(a) Representations. The Employee represents, warrants and
covenants that:
(i) Any shares purchased upon exercise of this option
shall be acquired for the Employee's account or investment only and not with a
view to, or for sale in connection with, any distribution of the shares in
violation of the Securities Act of 1933 (the "Securities Act") or any rule or
regulation under the Securities Act.
(ii) The Employee has had such opportunity as he or
she has deemed adequate to obtain from representatives of the Company such
information as is necessary to permit the Employee to evaluate the merits and
risks of his or her investment in the Company.
(iii) The Employee is able to bear the economic risk
of holding shares acquired pursuant to the exercise of this option for an
indefinite period.
(iv) The Employee understands that (A) the shares
acquired pursuant to the exercise of this option will not be registered under
the Securities Act and are "restricted securities" within the meaning of Rule
144 under the Securities Act; (B) such shares cannot be sold, transferred or
otherwise disposed of unless they are subsequently registered under the
Securities Act or an exemption from registration is then available; (C) in any
event, the exemption from registration under Rule 144 will not be available for
at least two years and even then will not be available unless a public market
then exists for the Common Stock, adequate information concerning the Company is
then available to the public and other terms and conditions of Rule 144 are
complied with; and (D) there is now no registration statement on file with the
Securities and Exchange Commission with respect to any stock of the Company and
the Company has no obligation or current intention to register any shares
acquired pursuant to the exercise of this option under the Securities Act.
By making payment upon exercise of this option, the Employee shall be deemed to
have reaffirmed, as of the date of such payment, the representations made in
this Section 13.
(b) Legend on Stock Certificates. All stock certificates
representing shares of Common Stock issued to the Employee upon exercise of this
option shall have affixed thereto a legend substantially in the following form,
in addition to any other legends required by applicable state law:
"The shares of stock represented by this certificate have not
been registered under the Securities Act of 1933 and may not be
transferred, sold or otherwise disposed of in the absence of an
effective registration statement with respect to the shares
evidenced by this certificate, filed and made effective under the
Securities Act of 1933, or an opinion of counsel satisfactory to
the Company to the effect that registration under such Act is not
required."
14. Miscellaneous.
(a) Except as provided herein, this option may not be amended or
otherwise modified unless evidenced in writing and signed by the Company and the
Employee.
-12-
<PAGE> 13
(b) All notices under this option shall be mailed or delivered by
hand to the parties at their respective addresses set forth beneath their names
below or at such other address as may be designated in writing by either of the
parties to one another.
(c) This option shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
Date of Grant: FAXNET CORPORATION
_______________, 199__
By:
-------------------------------------
Title:
----------------------------------
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<PAGE> 14
EMPLOYEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing Option and agrees to the
terms and (conditions thereof . The undersigned hereby acknowledges receipt of a
copy of the Company's 1996 Employee and Consultant Stock Option Plan.
EMPLOYEE
----------------------------------------
Address:
--------------------------------
--------------------------------
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<PAGE> 15
EXHIBIT B
FAXNET CORPORATION
NONSTATUTORY STOCK OPTION AGREEMENT
1. Grant of Option. FaxNet Corporation, a Delaware corporation (the
"Company"), hereby grants to _______________ (the "Optionee") an option,
pursuant to the Company's 1996 Employee and Consultant Stock Option Plan (the
"Plan") , to purchase an aggregate of __________ shares of Common Stock, $0.01
par value ("Common Stock") , of the Company at a price of $_____ per share,
purchasable as set forth in, and subject to the terms and conditions of, this
option and the plan. This option is not intended to qualify as an incentive
stock option within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code H ) . Except where the context otherwise requires,
the term "Company" shall include the parent and all subsidiaries of the Company
as defined in Sections 424(e) and 424(f) of the Code.
2. Exercise of Option and Provisions for Termination.
(a) Vesting Schedule. Except as otherwise provided in this
Agreement, this option may be exercised prior to the date 30 days after the
tenth anniversary of the date of grant (hereinafter the "Expiration Date") in
installments as to not more than the number of shares and during the respective
installment periods set forth in the table below. The right of exercise shall be
cumulative so that if the option is not exercised to the maximum extent
permissible during any exercise period it shall be exercisable, in whole or in
part, with respect to all shares not so purchased at any time prior to the
Expiration Date or the earlier termination of this option.
<TABLE>
<CAPTION>
Total No. of
Exercise Period Shares Exercisable
--------------- ------------------
<S> <C>
Prior to _____________, 19___ -0-
On or after __________, 19___ __________
but prior to _________, 19___
On or after __________, 19___ __________
but prior to _________, 19___
On or after __________, 19___ __________
but prior to _________, 19___
On or after __________, 19___ __________
</TABLE>
This option may not be exercised at any time on or after the Expiration Date.
(b) Exercise Procedure. Subject to the conditions set forth in
this Agreement, this option shall be exercised by the Optionee's delivery of
written notice of exercise to the Treasurer of the Company specifying the number
of shares to be purchased and the purchase price to be paid therefor and
accompanied
-15-
<PAGE> 16
by payment in full in accordance with Section 3. Such exercise shall be
effective upon receipt by the Treasurer of the Company of such written notice
together with the required payment. The Optionee may purchase fewer than the
total number of shares covered hereby, provided that no partial exercise of this
option may be for any fractional share or for fewer than ten whole shares.
[(c) Continuous Employment Required. Except: as otherwise
provided in this Section 2, this option may not be exercised unless the
Optionee, at the time he or she exercises this option, is, and has been at all
times since the date of grant of this option, an employee of the Company or, in
the case of an Optionee who is a consultant to the Company, unless the
consulting relationship is not interrupted or terminated by the Company. For all
purposes of this option, (i) "employment" shall be defined in accordance with
the provisions of Section 1. 421- 7 (h) of the Income Tax Regulations or any
successor regulations, and (ii) if this option shall be assumed or a new option
substituted therefor in a transaction to which Section 424(a) of the Code,
applies, employment by such assuming or substituting corporation (hereinafter
called the "Successor Corporation") shall be considered for all purposes of this
option to be employment by the Company.
(d) Termination of Employment. "If the Optionee ceases to be
employed by the Company or if the Optionee's consulting relationship is
interrupted or terminated by the Company for any reason other than death or
disability or a discharge for "cause," as provided. below, the right to exercise
this Option shall terminate three months after such cessation (but in no event
after the Expiration Date), provided that this option shall be exercisable only
to the extent that the Optionee was entitled to exercise this option on the date
of such cessation.
(e) Exercise Period Upon Death or Disability. If the Optionee
dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code or
any successor provision thereto) prior to the Expiration Date, while he or she
is an employee of or consultant to the Company, or if the Optionee dies within
three months after the Optionee ceases to be an employee of or consultant to the
Company (other than as the result of a discharge for "cause', or termination of
a consulting relationship for "cause", in each case as specified in paragraph W
below) , this option shall be exercisable, within the period of one year
following the date of death or disability of the Optionee (but in no event after
the Expiration Date), by the Optionee or by the person to whom this option is
transferred by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order (as defined in the Code) or Title I of the
Employee Retirement Income Security Act, or the rules thereunder, provided that
this option shall be exercisable only to the extent that this option was
exercisable by the Optionee on the date of his or her death or disability.
Except as otherwise indicated by the context, the term "Optionee," as used in
this option, shall be deemed to include the estate of the Optionee or any person
who acquires the right to exercise this option by bequest or inheritance or
otherwise by reason of the death of the Optionee or pursuant to a qualified
domestic relations order (as defined in the Code) or Title I of the Employee
Retirement Income Security Act, or the rules thereunder.
(f) Discharge for Cause. If the Optionee, prior to the Expiration
Date, ceases his or her employment or consulting relationship with the Company
because he or she is discharged or terminated for "cause" (as defined below),
the right to exercise this option shall terminate immediately upon such
cessation of employment. "Cause" shall mean willful misconduct in connection
with the Optionee's employment or consulting relationship or willful failure to
perform his or her employment or consulting responsibilities in the best
interests of the Company (including, without limitation, breach by the Optionee
of any provision of any employment, nondisclosure, non-competition or other
similar agreement between the Optionee and the Company), as determined by the
Company, which determination shall be conclusive.]
3. Payment of Purchase Price.
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<PAGE> 17
(a) Method of Payment. Payment of the purchase price for shares
purchased upon exercise of this option shall be made by delivery to the Company
of cash or a check to the order of the Company in an amount equal to the
purchase price of such shares, or by delivery to the Company of shares of Common
Stock of the Company then owned by the Optionee having a fair market value equal
in amount to the purchase price of such shares, or by any combination of such
methods of payment.
(b) Valuation of Shares Tendered in Payment of Purchase Price.
For the purposes hereof, the fair market value of any share of the Company's
Common Stock which may be delivered to the Company in exercise of this option
shall be determined in good faith by the Board of Directors of the Company.
(c) Delivery of Shares Tendered in Payment of Purchase Price. If
the Company permits the Optionee to exercise options by delivery of shares of
Common Stock of the Company, the certificate or certificates representing the
shares of Common Stock of the Company to be delivered shall be duly executed in
blank by the Optionee or shall be accompanied by a stock power duly executed in
blank suitable for purposes of transferring such shares to the Company.
Fractional shares of Common Stock of the Company will not be accepted in payment
of the purchase price of shares acquired upon exercise of this option.
(d) Restrictions Upon Use of Option Stock. Notwithstanding the
foregoing, no shares of Common Stock of the Company may be tendered in payment
of the purchase price of shares purchased upon exercise of this option if the
shares to be so tendered were acquired within twelve (12) months before the date
of such tender, through the exercise of an option granted under the Plan or any
other stock option or restricted stock plan of the Company.
4. Delivery of Shares; Compliance With Securities Law, Etc.
(a) General. The Company shall, upon payment of the option price
for the number of shares purchased and paid for, make prompt delivery of such
shares to the Optionee, provided that if any law or regulation requires the
Company to take any action with respect to such shares before the issuance
thereof, then the date of delivery of such shares shall be extended for the
period necessary to complete such action.
(b) Listing, Qualification. Etc. This option shall be subject to
the requirement that if, at any time, counsel to the Company shall determine
that the listing, registration or qualification of the shares subject hereto
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, is necessary as a condition
of, or in connection with, the issuance or purchase of shares hereunder, this
option may not be exercised, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions acceptable to the Board of Directors. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
5. Nontransferability of Option. Except as provided in paragraph (e) of
Section 2, this option is personal and no rights granted hereunder may be
transferred, assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise) nor shall any such rights be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this option or of such rights contrary to
the provisions hereof, or upon the levy of any attachment or similar process
upon this option or such rights, this option and such rights shall, at the
election of the Company, become null and void.
6. No Special Employment Or Consulting Rights. Nothing contained in the
Plan or this option shall be construed or deemed by any person under any
circumstances to bind the Company to continue the employment of the Optionee or
the continuation of the consulting relationship with the Optionee for the
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<PAGE> 18
period within which this option may be exercised. However, during the period of
the Optionee's employment or consulting relationship, the Optionee shall. render
diligently and faithfully the services which are assigned f ram time to time by
the Board of Directors or by the executive officers of the Company and shall at
no time take any action which directly or indirectly would be inconsistent with
the best interests of the Company.
7. Rights as a Shareholder. The Optionee shall have no rights as a
shareholder with respect to any shares which nay be purchased by exercise of
this option unless and until a certificate representing such shares is duly
issued and delivered to the Optionee. No adjustment shall be made for dividends
or other rights for which the record date is prior to the date such stock
certificate is issued.
8. Recapitalization.
(a) General. If, as a result of a merger, consolidation, sale of
all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other distribution with respect to the outstanding shares of Common
Stock or other securities, the outstanding shares of Common Stock are increased
or decreased, or are exchanged for a different number or kind of shares or other
securities, or if additional shares or new or different shares or other
securities are distributed with respect to such shares of Common Stock or other
securities, an appropriate and proportionate adjustment may be made in (i) the
number and kind of shares or other securities subject to this option and (ii)
the price for each share subject to this option, without changing the aggregate
purchase price as to which this option remains exercisable.
(b) Board Authority to Make Adjustments. Adjustments under this
Section 8 will be made by the Board of Directors, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final, binding
and conclusive. No fractional shares will be issued under this option on account
of any such adjustments.
9. Mergers. Etc.
(a) General. In the event of a consolidation or merger in which
the Company is not the surviving corporation, or which results in the
acquisition of substantially all of the Company's outstanding Common Stock by a
single person, entity or group of persons or entities acting in concert, or in
the event of the sale or transfer of all or substantially all of the assets of
the Company, or in the event of a reorganization or liquidation of the Company,
prior to the Expiration Date or termination of this option (each, an "Organic
Event") , the Optionee shall, with respect to this option or any unexercised
portion hereof, be entitled to the rights and benefits, and be subject to the
limitations, set forth in Section 16 of the Plan.
(b) Acceleration. In the event of the occurrence of an Organic
Event after the first anniversary of the date hereof, the vesting schedule set
forth in Section 3 (a) of this Agreement may be accelerated in whole or in part
at the sole discretion of the Board of Directors of the Company.
10. Withholding Taxes. The Company's obligation to deliver shares upon
the exercise of this option shall be subject to the Optionee's satisfaction of
all applicable federal, state and local income and employment tax withholding
requirements.
11. Investment Representations; Legend.
(a) Representations. The Optionee represents, warrants and
covenants that:
(i) Any shares purchased upon exercise of this option
shall be acquired for the Optionee's account for investment only, and not with a
view to, or for sale in connection with, any
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<PAGE> 19
distribution of: the shares in violation of the Securities Act of 1933 (the
"Securities Act") , or any rule or regulation under the Securities Act.
(ii) The Optionee has had such opportunity as he or
she has deemed adequate to obtain from representatives of the Company such
information as is necessary to permit the Optionee to evaluate the merits and
risks of his or her investment in the Company.
(iii) The Optionee is able to bear the economic risk
of holding such shares acquired pursuant to the exercise of this option for an
indefinite period.
(iv) The Optionee understands that (A) the shares
acquired pursuant to the exercise of this option will not be registered under
the Securities Act and are "restricted securities" within the meaning of Rule
144 under the Securities Act; (B) such shares cannot be sold, transferred or
otherwise disposed of unless they are subsequently registered under the
Securities Act or an exemption from registration is then available; (C) in any
event, the exemption from registration under Rule 144 will not be available for
at least two years and even then will not be available unless a public market
then exists for the Common Stock, adequate information concerning the Company is
then available to the public, and other terms and conditions of Rule 144 are
complied with; and (D) there is now no registration statement on file with the
Securities and Exchange Commission with respect to any stock of the Company and
the Company has no obligation or current intention to register any shares
acquired pursuant to the exercise of this option under the Securities Act.
By making payment upon exercise of this option, the Optionee shall be deemed to
have reaffirmed, as of the date of such payment, the representations made in
this Section 11.
(b) Legend on Stock Certificate. All stock certificates
representing shares of Common Stock issued to the Optionee upon exercise of this
option shall have affixed thereto a legend substantially in the following form,
in addition to any other legends required by applicable state law:
"The shares of stock represented by this certificate have not
been registered under the Securities Act of 1933 and may not be
transferred, sold or otherwise disposed of in the absence of an
effective registration statement with respect to the shares
evidenced by this certificate, filed and made effective under the
Securities Act of 1933, or an opinion of counsel satisfactory to
the Company to the effect that registration under such Act is not
required."
12. Miscellaneous.
(a) Except as provided herein, this option may not be amended or
otherwise modified unless evidenced in writing and signed by the Company and the
Optionee.
(b) All notices under this option shall be mailed or delivered by
hand to the parties at their respective addresses set forth beneath their names
below or at such other address as may be designated in writing by either of the
parties to one another.
(c) This option shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
Date of Grant: FAXNET CORPORATION
_______________, 199___
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<PAGE> 20
By:
-------------------------------------
Title:
----------------------------------
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<PAGE> 21
OPTIONEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing Option and agrees to the
terms and conditions thereof. The undersigned hereby acknowledges receipt of a
copy of the Company's 1996 Employee and Consultant Stock Option Plan.
OPTIONEE
----------------------------------------
ADDRESS:
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<PAGE> 1
EXHIBIT 10.2
XETI, INC.
1997 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant. Stock Purchase
Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan in accordance with Section 4 hereof.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are
granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 hereof.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means XETI, Inc., a California corporation.
(h) "Consultant" means any person who is engaged by the Company
or any Parent or Subsidiary to render consulting or advisory services to such
entity.
(i) "Director" means a member of the Board of Directors of the
Company.
(j) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a
<PAGE> 2
Nonstatutory Stock Option. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute "employment" by
the Company.
(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.
(q) "Option Agreement" means a written or electronic agreement
between the Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan.
(r) "Option Exchange Program" means a program whereby outstanding
Options are exchanged for Options with a lower exercise price.
(s) "Optioned Stock" means the Common Stock subject to an Option
or a Stock Purchase Right.
(t) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right 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 1997 Stock Plan.
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<PAGE> 3
(w) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(x) "Section 16(b)" means Section 16(b) of the Securities
Exchange Act of 1934, as amended.
(y) "Service Provider" means an Employee, Director or Consultant.
(z) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(aa) "Stock Purchase Right" means a right to purchase Common
Stock pursuant to Section 11 below.
(bb) "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 405,000 Shares. The Shares may be authorized but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated). However, Shares that have actually been issued under the Plan,
upon exercise of either an Option or Stock Purchase Right, shall not be returned
to the Plan and shall not become available for future distribution under the
Plan, except that if Shares of Restricted Stock are repurchased by the Company
at their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
(a) The Plan shall be administered by the Board or a Committee
appointed by the Board, which Committee shall be constituted to comply with
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options
and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered
by each such award granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, of any
Option or Stock Purchase Right granted hereunder. Such terms and conditions
include, but are not limited to, the exercise price, the time or
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<PAGE> 4
times when Options or Stock Purchase Rights may be exercised (which may be based
on performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Stock
Purchase Right or the Common Stock relating thereto, based in each case on such
factors as the Administrator, in its sole discretion, shall determine;
(vi) to determine whether and under what circumstances
an Option may be settled in cash under subsection 9(f) instead of Common Stock;
(vii) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option has declined since the date the Option was granted;
(viii) to initiate an Option Exchange Program;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by Optionees
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable; and
(xi) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees.
5. Eligibility.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
(b) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon any Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall it interfere in
any way with his or her right or the Company's right to terminate such
relationship at any time, with or without cause.
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<PAGE> 5
6. Term of Plan. The Plan shall become effective upon its adoption by
the Board. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 14 of the Plan.
7. Term of Option. The term of each Option shall be stated in the Option
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof. In the case of an Incentive Stock Option granted
to an Optionee who, at the time the Option is granted, owns stock representing
more 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)
years from the date of grant or such shorter term as may be provided in the
Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the exercise price shall be no less than 110% of the Fair Market Value per Share
on the date of grant.
(B) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a Service Provider who, at the time
of grant of such Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the exercise price shall be no less than 110% of the Fair Market
Value per Share on the date of the grant.
(B) granted to any other Service Provider, the per
Share exercise price shall be no less than 85% of the Fair Market Value per
Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price other than as required above pursuant to
a merger or other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan, or (6) any combination of the foregoing methods of payment. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
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<PAGE> 6
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms hereof at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement, but in no case at a rate of less than 20% per year over
five (5) years from the date the Option is granted. Unless the Administrator
provides otherwise, vesting of Options granted hereunder shall be tolled during
any unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. The
Company 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.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares thereafter available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, such Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement (of at
least thirty (30) days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option
as set forth in the Option Agreement). In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for three (3) months
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified by
the Administrator, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
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 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. 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.
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<PAGE> 7
(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.
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 or electronically of the terms, conditions and
restrictions related to the offer, including the number of Shares that such
person shall be entitled to purchase, the price to be paid, and the time within
which such person must accept such offer. The terms of the offer shall comply in
all respects with Section 260.140.42 of Title 10 of the California Code of
Regulations. The offer shall be accepted by execution of a Restricted Stock
purchase agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine, but in no case 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.
(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.
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<PAGE> 8
12. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been 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.
(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 fifteen (15) 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 or Stock Purchase Right shall
lapse as to all such Shares, provided the proposed dissolution or liquidation
takes place at the time and in the manner contemplated. To the extent it has not
been previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. Except as otherwise set forth in the
Option Agreement, in the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company, each
outstanding Option and Stock Purchase Right shall be assumed or an equivalent
option or right substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option or Stock Purchase
Right, the Optionee shall fully vest in and have the right to exercise the
Option or Stock Purchase Right as to all of the Optioned Stock, including Shares
as to which it would not otherwise be vested or exercisable. If an Option or
Stock Purchase Right becomes fully vested and exercisable in lieu of assumption
or substitution in the event of a merger or sale of assets, the Administrator
shall notify the Optionee in writing or electronically that the Option or Stock
Purchase Right shall be fully exercisable for a period of fifteen (15) days from
the date of such notice, and the Option or Stock Purchase Right shall terminate
upon the expiration of such period. For the purposes of this paragraph, the
Option or Stock Purchase Right shall be considered assumed if, following the
merger or sale of assets, the option or right confers the right to purchase or
receive, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets is not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock
subject to the Option or Stock Purchase
-8-
<PAGE> 9
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.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Board shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a condition to the exercise of
an Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
16. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
17. Reservation of Shares. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under Applicable Laws.
19. Information to Optionees and Purchasers. The Company shall provide
to each Optionee and to each individual who acquires Shares pursuant to the
Plan, not less frequently than annually during the period such Optionee or
purchaser has one or more Options or Stock Purchase Rights outstanding, and, in
the
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<PAGE> 10
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.
-10-
<PAGE> 11
XETI, INC.
1997 STOCK 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]
The undersigned Optionee has been granted an Option to purchase Common
Stock of the Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:
<TABLE>
<S> <C>
Grant Number
----------------------------------
Date of Grant
----------------------------------
Vesting Commencement Date
----------------------------------
Exercise Price per Share $
---------------------------------
Total Number of Shares Granted
----------------------------------
Total Exercise Price $
---------------------------------
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date:
----------------------------------
Vesting Schedule:
----------------------------------
</TABLE>
This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:
[25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 1/48 of the Shares subject to the Option
shall vest each month thereafter], subject to Optionee's continuing to be a
Service Provider on such dates.
Termination Period:
This Option shall be exercisable for three (3) months after Optionee
ceases to be a Service Provider. Upon Optionee's death or disability, this
Option may be exercised for such longer period as provided in the Plan. In no
event may Optionee exercise this Option after the Term/Expiration Date as
provided above.
<PAGE> 12
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant (the "Optionee"), an option (the
"Option") to purchase the number of Shares set forth in the Notice of Grant, at
the exercise price per Share set forth in the Notice of Grant (the "Exercise
Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 14(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds
the $100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
(a) Right to Exercise. This Option shall be exercisable during
its term in accordance with the Vesting Schedule set out in the Notice of Grant
and with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by
delivery of an exercise notice in the form attached as Exhibit A (the "Exercise
Notice") which shall state the election to exercise the Option, the number of
Shares with respect to which the Option is being exercised, and such other
representations and agreements as may be required by the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by the aggregate
Exercise Price.
No Shares shall be issued pursuant to the exercise of an
Option unless such issuance and such exercise complies with Applicable laws.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
(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 (a "Merger"), 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 (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 Optionee would not otherwise be vested or exercisable. If an
Option becomes fully vested and exercisable in lieu of assumption or
substitution in connection with a Merger, the Administrator shall notify the
Optionee in writing 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, the
option or right confers the right to purchase or receive, for each Share of
Optioned Stock subject to the Option immediately prior to the Merger, the
consideration (whether stock, cash, or other securities or property) received in
the Merger 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
-2-
<PAGE> 13
Merger 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, for each
Share of Optioned Stock subject to the Option, 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.
3. Optionee's Representations. In the event the Shares have not been
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if required by the Company, concurrently with
the exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as Exhibit
B, and shall read the applicable rules of the Commissioner of Corporations
attached to such Investment Representation Statement.
4. Lock-Up Period. Optionee hereby agrees that, if so requested by the
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
5. Method of Payment. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan; or
(c) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
6. Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.
7. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
-3-
<PAGE> 14
9. Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD
CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of ISO. If this Option qualifies as an ISO, there
will be no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.
(b) Exercise of ISO Following Disability. If the Optionee ceases
to be an Employee as a result of a disability that is not a total and permanent
disability as defined in Section 22(e)(3) of the Code, to the extent permitted
on the date of termination, the Optionee must exercise an ISO within three
months of such termination for the ISO to be qualified as an ISO.
(c) Exercise of Nonstatutory Stock Option. There may be a regular
federal income tax liability upon the exercise of a Nonstatutory Stock Option.
The Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price. If Optionee is an
Employee or a former Employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and refuse
to deliver Shares if such withholding amounts are not delivered at the time of
exercise.
(d) Disposition of Shares. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal income tax purposes. In the
case of an ISO, if Shares transferred pursuant to the Option are held for at
least one year after exercise and of at least two years after the Date of Grant,
any gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal income tax purposes. If Shares purchased under an ISO
are disposed of within one year after exercise or two years after the Date of
Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price and the lesser of (1) the Fair Market Value of the
Shares on the date of exercise, or (2) the sale price of the Shares. Any
additional gain will be taxed as capital gain, short-term or long-term depending
on the period that the ISO Shares were held.
(e) Notice of Disqualifying Disposition of ISO Shares. If the
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
10. 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.
-4-
<PAGE> 15
11. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH
THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that
he or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option. Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.
OPTIONEE: XETI, INC.
- ----------------------------------- -----------------------------------
Signature By
- ----------------------------------- -----------------------------------
Print Name Title
- -----------------------------------
- -----------------------------------
Residence Address
-5-
<PAGE> 16
EXHIBIT A
XETI, INC.
1997 STOCK PLAN
EXERCISE NOTICE
XETI, Inc.
5150 El Camino Real, Suite A-32
Los Altos, CA 94022
Attention: President
1. Exercise of Option. Effective as of today, ___________, 19__, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of XETI, Inc. (the
"Company") under and pursuant to the 1997 Stock Plan (the "Plan") and the Stock
Option Agreement dated ________, 19 (the "Option Agreement").
2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price of the Shares, as set forth in the Option Agreement.
3. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance of the Shares (as evidenced
by the appropriate entry on the books of the Company or of a 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 Shares shall be issued to the
Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 12 of the Plan.
5. Company's Right of First Refusal. Before any Shares held by Optionee
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase
<PAGE> 17
all, but not less than all, of the Shares proposed to be transferred to any one
or more of the Proposed Transferees, at the purchase price determined in
accordance with subsection (c) below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice, that any such sale or
other transfer is effected in accordance with any applicable securities laws and
that the Proposed Transferee agrees in writing that the provisions of this
Section shall continue to apply to the Shares in the hands of such Proposed
Transferee. If the Shares described in the Notice are not transferred to the
Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(f) Exception for Certain Family Transfers. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to the Optionee's immediate family or a trust for the benefit of
the Optionee's immediate family shall be exempt from the provisions of this
Section. "Immediate Family" as used herein shall mean spouse, lineal descendant
or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so transferred subject to
the provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First
Refusal shall terminate as to any Shares upon the first sale of Common Stock of
the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
6. Tax Consultation. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the Shares
together with any other legends that may be required by the Company or by state
or federal securities laws:
-2-
<PAGE> 18
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY
COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE
THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A
COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE
ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE
BINDING ON TRANSFEREES OF THESE SHARES.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY,
OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION
THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED
IN THE COMMISSIONER'S RULES.
Optionee understands that transfer of the Shares may be
restricted by Section 260.141.11 of the Rules of the California Corporations
Commissioner, a copy of which is attached to Exhibit B, the Investment
Representation Statement.
(b) Stop-Transfer Notices. Optionee agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
9. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
-3-
<PAGE> 19
10. Governing Law; Severability. This Agreement is governed by the
internal substantive laws but not the choice of law rules, of California.
11. Entire Agreement. The Plan and Option Agreement are incorporated
herein by reference. This Agreement, the Plan, the Option Agreement and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee.
Submitted by: Accepted by:
OPTIONEE: XETI, INC.
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Signature By
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Print Name Its
Address: Address:
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-----------------------------------
Date Received
-4-
<PAGE> 20
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: XETI, INC.
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities. Optionee
is acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company, a legend prohibiting their
transfer without the consent of the Commissioner of Corporations of the State of
California and any other legend required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to the Optionee,
the exercise will be exempt from registration under the Securities Act. In the
event the Company becomes subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or
such longer period as any market stand-off agreement may
<PAGE> 21
require) the Securities exempt under Rule 701 may be resold, subject to the
satisfaction of certain of the conditions specified by Rule 144, including: (1)
the resale being made through a broker in an unsolicited "broker's transaction"
or in transactions directly with a market maker (as said term is defined under
the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the
availability of certain public information about the Company, (3) the amount of
Securities being sold during any three month period not exceeding the
limitations specified in Rule 144(e), and (4) the timely filing of a Form 144,
if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than two years after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than three years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(d) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
(e) Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities without the consent of the Commissioner of Corporations of
California. Optionee has read the applicable Commissioner's Rules with respect
to such restriction, a copy of which is attached.
Signature of Optionee:
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Date: , 19
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<PAGE> 22
ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: Restriction on Transfer. (a) The issuer of any security upon
which a restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each
issuee or transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102
of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants or
spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory or
country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such securities
is not in violation of any securities law of the foreign state, territory or
country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112,
25113 or 25121 of the Code, of the securities to be transferred, provided that
no order under Section 25140 or subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112
or 25113 of the Code, provided that no order under Section 25140 or subdivision
(a) of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property
Law or to the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property
Law or by the administrator of the unclaimed property law of another state if,
in either such case, such person (i) discloses to potential purchasers at the
sale that transfer of the securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does
not involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102; provided that any such transfer is on the condition that
any certificate evidencing the security issued to such transferee shall contain
the legend required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION
THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES."
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby 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
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San Francisco, California
February 1, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the 1996 FaxNet Stock Option Plan, 1997 Xeti Stock Option
Plan and the 1998 Stock Option Plan of our report dated November 6, 1998 with
respect to the financial statements of FABRIK Corporation as of September 30,
1997 and 1998 and for each of the two years in the period ended September 30,
1998 included in the Critical Path Prospectus, dated June 1, 1999, of FABRIK
Corporation, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
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Walnut Creek, California
February 1, 2000
